A day doesn’t go by without some kind of news story about shortages and inflation brought on by supply chain problems.
Headlines about bare shelves in grocery stores, new cars and trucks in short supply and container ships anchored offshore waiting to be unloaded have been commonplace over the past few months.
Dr. Kim Whitehead, professor of quantitative management in the Anderson University College of Business, shared her perspective on what’s been happening over the past year in supply chain.
Speaking with Dr. Whitehead as she unpacks what’s going on and how consumers are affected, it becomes quickly clear that this is a complex issue with lots of moving parts.
What are some of the factors leading to disruptions in the supply chain?
“People are saying that the supply chain is broken; it’s not broken. There’s no quick fix like your car’s broken down and now you’re going to fix the engine and everything’s going to be better; It’s a whole domino effect.
A great part of what lies behind supply chain issues we hear about is due to global labor shortages. When we closed the world for COVID, we closed down the majority of workers in the world, except for essential workers. City workers were still working and to some extent transportation was still going, but not completely for moving people around the world. We closed down restaurants, theaters and manufacturing. Meat plants had to shut down because so many people were getting sick, then all of a sudden we had a meat shortage.
Really what’s led to this whole thing and what’s perpetuating it is lack of workers. We had a little bit of that in the United States and the world because the economy has been doing well, so even before COVID we had a desperate need for workers and an even more desperate need for skilled workers. What happened was, you sent a lot of workers home, and either they couldn’t come back or they didn’t want to come back. That hurt our warehouses, manufacturing and transportation. So all of these different pieces of the supply chain were really challenged by that and then when they could come back to work.
Now you can come back to work but you’re going to wear a mask or you’re going to be vaccinated—all of these things happened and people start coming back to work. They still had other problems. They had personal problems they had to deal with—my kids’ schools closed, I can’t take my child to daycare because there are no day care workers.
I saw a statistic that 63 percent of workers that are not returning to the workforce are women. That’s a huge problem that affects our supply chain. We just don’t have enough people and now when they want to come back to work they may not be able to because of other constraints on them. It’s not that they don’t want to work, but they have those constraints so they’re not able to come back into the workforce, so we have this great labor shortage.”
How has the transportation of goods and services been affected?
It costs so much right now to ship. That would be to ship over water or to ship over land. It’s getting very expensive because in order to get the workers, we have to pay so much more. To get a ship to come from China to here, we have to pay the additional cost of them hanging out outside the port of Los Angeles waiting to get in. So there’s all these additional costs to pay the employees.
Here’s an example: Twenty months ago you might have paid $3,500 for a shipment coming from China; that same shipment today will cost you $25,000. Shipping back to China might only cost you $1,900. So the costs have risen significantly. That’s one of the reasons we’re experiencing that in our economy where things cost so much more right now.
The grocery store is where most people are feeling this increase in prices, 30-40 percent. It’s not necessarily the food itself. You may have corn inside the can, but what about the can? Where do those materials come from? Where did the label come from? Where did the box come from that it was shipped in? All of these are different components that we don’t think about all the time.
What about the trucker shortage we hear about, and the truckers protesting in Canada?
When you make it harder for truck drivers to work, then you’re going to lose truck drivers. For example, right now we have all the protests about vaccinations and truck drivers and whether they can come across the Canadian border. We’re making it harder for them to do their work. We just recently had some laws passed in South Carolina that makes it harder for someone to get a Commercial Driver’s License. It’s interesting to me that in a time where we’re so desperate for people to do this job that’s not necessarily the most glamorous job and takes you away from home for a week at a time or more that we make it harder to qualify people to come and do it.
When people leave the workforce, they look at open positions that somebody else can backfill and if you’ve been driving a long haul truck, and you’ve been away from your home for three weeks out of the month, all of a sudden, now you can work in a manufacturing facility because that person left their job and be home every night. We change the dynamics of the workforce.
What do you say to people who think we have to make more goods in this country?
“It’s a global economy and I think God created the whole world, not just one country at a time. I think He intended for us to use the resources of the entire world that He’s given to us, and if we isolate ourselves I don’t think that’s in our best interest or does it meet a Christian worldview.”
The New York Times recently declared that a normal supply chain in 2022 is unlikely. Do you see normalcy coming any time soon?
“We’re always in a process of evolution. As we get more technology, as we get more transparency in the supply chain, I don’t think there’s a normal and I don’t think we want a status quo. We want to keep progressing. We made a lot of progress in farm-to-table. A couple of years ago people were dying from Romaine lettuce. We’ve learned ways now to trace that all the way to the farm where it came from. Before we couldn’t do that.”
What are you telling your students about opportunities for them in the midst of supply chain problems?
“I’ll tell them some of the things that companies are doing to counter these problems.
They’re relying more on Artificial Intelligence (AI). They’re relying more on robotics. Where they didn’t necessarily make those capital investments before, now that they have fewer workers they don’t have a choice. They have to rely more on robotics, even within a warehouse. You can have robotic systems that move boxes from one place to another instead of a person on a forklift. You use these conveyor belts. Our warehouses are making more and more investments in that.
So, what I tell my students is ‘You have to be aware of that and you have to understand how that changes the dynamic of what takes place in distribution and transportation because we are making those changes; you’ve got to understand that and be able to make business decisions around it and understand the technology.’ Those people that understand those things and can make those kinds of recommendations or can do those kinds of financial analysis—to determine that you can make that one or two million dollar investment—those are the people you will need to come and work for you.
Another area is just being able to be flexible. As a manager, it’s being flexible and open to ideas and being creative and being able to problem-solve.
A lot of what we spend time on in our supply chain management program is really teaching students how to problem-solve. Not how to solve one particular kind of problem but really teaching them the skills and giving them the tools to problem-attack:
- Here’s my problem.
- Let’s define it.
- Let’s work together as a team.
- Let’s find different ways to attack it.
- What can we do to try to solve this problem on behalf of our organization?
We really try to teach them to be well-rounded decision makers. Supply chain in academia is considered to be a decision science, so we’re teaching them decision science tools and giving them the tools where they can make better decisions when they get out to the workforce.
Profitability is important, but so are people, right?
“As companies, sometimes we have to look beyond the competition but be looking out for the welfare of society as a whole; so if we’re in meat production and we need to get chicken out there to the public so that they eat, pinto beans or whatever it is that day—we need to be thinking about how can we have this collaborative ecosystem that creates a supply chain that’s as efficient as possible.
Sometimes those competitions create barriers, and those barriers affect the end consumer. The barriers affect whether or not we can buy toilet paper or paper towels. That’s a problem, so we want to work together toward the good of society. I don’t think we’ve been as good at the social aspect. We look at the social aspect as much as we say ‘we want to hire the right people and we don’t want to discriminate.
“One of the things we haven’t done well is looking at ‘how our company affects society and how do we serve the greater good?’ How do we serve the public and their needs for clean water and not polluting the air and things like that, but how can we ensure they have the food they need? How do we ensure they have the day to day necessities they need?
That’s one of the things that we really try to teach our students, to have that type of well-rounded and global perspective.”