Until a few months ago, most Canadians likely didn’t give much thought to their next toilet paper purchase. But as shelves of toilet tissue – and hand sanitizer and yeast and flour – began to empty, a powerful instinct began to take over.
“We are hardwired to store, to stockpile, to plan for the future,” says Dr. Rickard Enstroem, who oversees MacEwan University’s Supply Chain Management major. “It’s like a personal insurance system to flatten our varying availability of resources.”
Seeing empty store shelves and other visual cues of scarcity, Enstroem explains, triggers our most basic decision-making instincts, including loss aversion – the idea that losses loom much larger than gains. “This can lead to a sense of urgency and the feeling that we need to take action out of concern about our future survival,” he says. “And that overrides everything.”
That psychological response to perceived shortages, says Enstroem, launched supply chains into the spotlight. Citizens expressed gratitude to links in the chain we don’t often consider – like truckers and delivery drivers. Stores placed limits on purchases so suppliers could catch up with demand. And politicians assured us that supply chains were intact.
But what does that really mean? What does a supply chain actually look like? And how might a dramatic, sudden change – like a global pandemic – affect the complex network that impacts every single thing we buy?
Supply chains 101
In the most basic terms, a supply chain is about getting a product with the right set of attributes to the right place at the right time to benefit the end user. But that process is far from simple, and with the sector’s complexity and global focus, Enstroem says a linear “chain” isn’t necessarily the best way to visualize it.
“Supply chains are really more like huge webs of interconnected stakeholders and business partners,” he says.
While everyday products – toilet paper and many food products, for example – are produced on a more local scale and tend to have relatively straightforward supply chains, explains Enstroem, the process of guiding electronics, apparel and pharmaceuticals (80 per cent of which tend to be produced overseas) through each step from concept to end user, can be incredibly involved.
Following the web analogy, getting a product like your smartphone into your hand can involve thousands of individual “strands,” including raw materials suppliers, parts suppliers, manufacturers, distributors, importers, exporters, wholesalers, freight forwarders, customs brokers, logistics service providers, warehousers, supply chain consultants, financial institutions and retailers – just to name a few.
When those individual strands all work together, says Enstroem, products travel seamlessly, nimbly and cost-effectively to consumers. But throw a global pandemic into the mix and it suddenly gets much more complicated.
Shortages and skyrocketing shipping costs
MacEwan alum Brent Willett (Bachelor of Applied International Business and Supply Chain Management, ’07) had a front-row seat to the impact COVID-19 had on supply chains. After more than a decade in the oil and gas sector, Willett was just starting his new role as director of supply chain and innovation with industrial parts distributor Motion Canada in mid-March.
“I walked into shortages, curtailed allocations for shipments out of China and shipping costs that increased up to 80 times overnight,” says Willet, who also sits on the board of Supply Chain Canada. Those types of issues, he adds, can completely shut down organizations without robust – and integrated – supply chains.
“As an industry, I think we are realizing just how important the relationships throughout the supply chain are – how critical it is to be connected and to share data at every step along the way,” he says. “While there has been a huge push toward innovation – AI and robotics – in our sector over the last 15 years, integrated networks that focus on relationships, and share forecasts, data and information, are the ones that are going to win.”
Enstroem agrees that bolstering relationships can play a key part in mitigating risk. “It’s the dynamic partnerships among entities in the supply chain – its interconnectivity – that really make it work.”
But in some cases, relationships alone may not be enough. When it comes to products like pharmaceuticals, where Canada relies heavily on international suppliers and the risk of a breakdown in supply chains could be devastating, Enstroem says we may see a move away from the “centralize and globalize” focus of decades past that often places the highest value on low cost, low inventory levels and increased efficiency.
“Given what has happened with COVID-19 and the realization that the global supply chain can be quite exposed to risk, we’re starting to see some momentum in conversations around the need to decentralize, to localize and to decouple from the global supply chain,” says Enstroem.
Choosing responsiveness and resilience over leaner processes, however, comes at a price. “When companies opt for domestic or local suppliers, we gain security, but we perhaps sacrifice on higher prices,” says Enstroem. “It’s definitely a balancing act.”
Regardless of how that balance is struck, Enstroem and Willett agree that supply chain management is coming into its own. What was once generally viewed as a back-office function, says Willett, is being recognized for what it is: a key part of every business – one that connects everything from marketing and accounting to operations and manufacturing.
“Moving forward, supply chain management is an area that businesses are going to be focused on,” he says. “And a lot of organizations are going to be looking at what kind of talent they need into the future.”
That’s good news for students poised to enter the field in the coming years, says Enstroem.
“This program is a gem,” he says of MacEwan’s program that has been graduating students for close to 20 years. “Students can carve out their own niche – problem solving, data analytics, procurement, logistics – there is a complexity and, for the right person, a real sense of adventure that comes with working in this field.”