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Kennedy: Shortages unfairly blamed on supply chain

Kennedy: Shortages unfairly blamed on supply chain

With store shelves emptied of some products in the coronavirus pandemic — toilet paper, spaghetti sauce, cheese — it may be easy to blame the supply chain for the breakdown, but the picture is more complicated.

“To blame the supply chain is convenient, but it’s the most obvious element of a series of elements,” says Steven A. Melnyk, professor of operations and supply chain management at Michigan State University in East Lansing. The school’s supply-chain master’s program has been ranked No. 1 by U.S. News & World Report since 2018.

“Why are we having such great shortages and why can’t the system respond? Because you have a perfect storm,” he tells me, ticking off seven contributing factors.

Among them is the nature of the demand that hit supermarkets and other food retailers in recent weeks, which was unprecedented.

“Most companies, when they deal with demand, are predicting it,” Melnyk says. But the volume sought by consumers “was just off the scale,” and retailers’ systems were caught off guard. “It was an event they had never foreseen.”

Retailers can plan for demand spikes that are predictable, such as the holiday buying season, to make sure they have inventory in place. (That doesn’t always work, though, as when a new product takes off unexpectedly — think the 1983 Cabbage Patch doll riots or the 1996 Tickle Me Elmo shortage.)

Melnyk also cites capacity — the people and plants that produce product — as having a role in the current shortages.

“If you have a sudden uptick in demand, it takes time to respond … you cannot change over immediately,” he says.

Companies have to decide whether to answer a demand spike by increasing capacity, weighing whether the investment costs are worth it if consumers likely will return to normal buying patterns and the hot demand for toilet paper, for instance, falls off.

Retailers and retail groups have asked consumers to think before they buy. “If you don’t need an item in the next two weeks, leave it for someone who does,” the National Retail Federation and Retail Industry Leaders Association urged Sunday, condemning hoarding and stockpiling as adding to the fear surrounding Covid-19.

Melnyk pointed out that some stores were putting purchase limits on some products to discourage hoarding, but he wondered if rationing might be needed, as occurred during World War II.

Then again, rationing, too, would take time to implement.

How long are we likely to see bare shelves, I had to ask. “That’s the 64,000-dollar question,” Melnyk responded.

“There’s a lot of uncertainty, but — and this is the big but — what’s necessary in this type of environment is very decisive action, a willingness to share ideas,” he says.

Leadership is needed “because in an environment like this, people are panicking and when they panic they don’t act rationally — and that’s beyond the purview of supply chains.”

Marlene Kennedy is a freelance columnist. Reach her at [email protected]

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