1. Define the problem described in this case study. What management, organization, and technology factors contributed to this problem?2. To what extent can information technology solve this problem? Explain your answer. 3. What management, organization, and technology issues should be addressed to redesign supply chains to deal with major disruptions such as the coronavirus pandemic? The COVID-19 pandemic has tested supply chains like no other event in recent history. Entirepopulations were isolating and quarantining, creating spikes in demand for certain products (such ashand sanitizer) and large drops in demand for others. Many businesses were shuttered for months,with small businesses, retail stores, and restaurants especially hard-hit. Large drops in demand,shortfalls in cash flow, worldwide port congestion, factory shutdowns, and disruptions to air cargo,trucking, and rail services paralyzed companies all over the world. Customers changed theirpurchasing habits. Many started spending more on essentials, creating shortages across both e-commerce and brick-and-mortar retail stores. Changes in consumer spending behavior upendedpredictive models as customers shifted spending to new stores, channels, and product lines. At thesame time, companies that didn't deal in essentials faced spending shortages, as millions of peoplefound themselves out of work. According to a March 11, 2020 analysis by Trading platform Forex.com,nearly 75 percent of all companies had already reported supply chain disruptions and that numberwas expected to rise to 80 percent. Manufacturing firms worldwide were especially affected by theshutdown of industrial activity in Wuhan, China, where the pandemic started. These firms haddepended on components, materials, and finished goods made in China. Most companies were unableto respond quickly and flexibly to supply chain disruptions caused by the order of magnitude of thecoronavirus pandemic, which can only be done if the entire supply chain is visible. Most companiesdon't have supply chain visibility. (Supply chain visibility is the ability of parts, components, or productsin transit to be tracked from the manufacturer to their final destination.) The majority of enterpriseshave only 20 percent visibility into their supply chains. Experts believe 70 to 80 percent visibility isrequired to deal with major supply chain disruptions. The modern supply chain is incredibly fragile.Companies have built global supply chains based on outsourcing to external suppliers and incrediblythin margins of safety stock. (Safety stock is an additional quantity of an item held by a company ininventory in order to reduce the risk that the item will be out of stock.) The prevailing wisdom in supplychain management has embraced "lean" principles that try to optimize costs by minimizing safetystock, using "just in time" delivery to keep only 15-30 days of products on hand, and concentratingsourcing in a few countries. For example, over 80 percent of manufacturing facilities that pro-ducecomponents for drugs in the United States are located abroad, mainly in China. Many companiesfound it cheaper to manufacture goods in China and elsewhere in Asia, rather than do so closer tohome. Auto parts, fashion, technology, medical gear, and drug components are especially vulnerableto sup-ply chain disruptions in Asia. To make supply chains more resilient, businesses need toeliminate their dependence on sourcing from a single supplier, region, or country. Large companiescan build regional supply chains and diversify the location of their manufacturing plants and theirsuppliers (see the Chapter 15 Interactive Session on Management). They should also consider pullingback from inventory-optimization and safety stock calculations that optimize costs by keeping stockto a minimum and build some level of reserves to absorb shocks, even if this increases costs. Thecost of manufacturing has been one of the key justifications for moving manufacturing off-shore.However, the labor cost component of manufacturing has been steadily growing smaller as newautomation tools have been developed. Thirty years ago, when labor costs represented 30 to 40percent of the cost to manufacture goods, U.S. manufacturers were tempted to move productionoffshore to Chinese factories replete with low-cost laborers assembling products by hand. Today, thetrend is toward more automated factories, which lower the labor component and reduce profit-and-loss pressures. U.S. leadership in factory automation will undoubtedly help bring some offshoremanufacturing back home. Switching to more digital tools for supply chain management can also behelpful. A contemporary supply chain management system increases transparency andresponsiveness because all the activities in the supply chain are able to interact with one another innear real-time. There are new digital applications and platforms to help companies establishinterconnected networks of what had been discrete, siloed supply chain processes and to managetheir supply chains more flexibly. Gartner Inc, predicts that by 2023, at least 50 percent of globalcompanies will be using artificial intelligence (see Chapter 11), advanced analytics, and the Internet ofThings (IoT) in supply chain operations. Firms such as Procter & Gamble (P&G) are using artificialintelligence machine learning algorithms to perform demand planning for products such as Tidedetergent multiple times per day. Other companies are implementing loT technologies such as GPSand radio-frequency identification (RFID-see Chapter 7) devices to identify and track items in storesand warehouses, as well as real-time data on variables such as speed of delivery. A word of caution:Even if a company uses digital supply chain management tools, they may need updating and fine-tuning in order to deal with major global shutdowns. The algorithms used by the sup-ply chainmanagement systems of large companies didn't work during the coronavirus pandemic. For example,Walmart, noted for its efficient state-of-the art supply chain management systems (see Chapter 3),found that disruptions during the pandemic made these systems unable to accurately predict howmany diapers and garden hoses it needed to keep on store shelves. Normally Walmart's system isable to accurately analyze inventory levels, historical purchasing trends, and discounts to recommendhow much of a product to order. But the worldwide disruption caused by the COVID-19 pandemiccaused the software's recommendations to change more frequently. Most retail companies base theirprediction of what customers will want and how much to order on some type of model or algorithm.Their models incorporate some understanding of how shocks like natural disasters disrupt supplychains and impact demand, using historical data to predict future trends. Under normal conditions,these algorithms work fairly well. But global pandemics are some-thing new that the models don'tknow how to take into account. Disasters like floods or hurricanes tend to be regional, but the COVID-19 pandemic disrupted the entire world. Production, transportation, and people's behavior changeddramatically during the pandemic. Because of these massive worldwide disruptions, the normal datafeeding the models, including historical buying patterns, aren't as relevant. The models in supply chainmanagement software can still be used, but the data need to be changed. The people who managesupply chains will need to be more active in interpreting the projections rather than assuming themodels will be able to capture everything that is going on. For example, Alloy, a consumer goodsanalytics company, has worked with a company that saw sales for its product rise 40 percent at amajor retailer in March 2020 as the pandemic started to surge in the U.S. The retailer placed a verylarge order for April to handle the spike in sales, but Alloy's analysts knew that demand for theproduct had plummeted, and that the retailer wouldn't be able to sell everything it had ordered. Alloytold the retailer not to purchase so much of the product. Technology for strengthening supply chains,in the form of innovations such as analytics, artificial intelligence, and machine learning alone won'tshore up vulnerabilities and inefficiencies. Companies must rethink their strategies and redesignsupply chains so that they're able to source product from multiple locations, depending on where adisruption occurs. One key lies in supply-chain mapping, with-out which companies can't deviseworkable recovery plans. The small number of companies that had mapped their supply networksprior to the pandemic were better prepared to deal with disruptions. These companies were able todetermine exactly which suppliers, sites, products, and parts were at risk, which could help themarrive at a solution more quickly. A company might assume that its biggest vulnera ility lies withprimary supplier. A detailed breakdown of its supply chain could show instead that the highest riskcomes from a small lower-tier supplier of a critical component that costs 10 cents.However, supply network mapping is time-consuming and expensive, and most companies have notdone so. (After the 2011 earthquake and tsunami, it took a team of 100 people at a Japanesesemiconductor manufacturer over a year to map the company's supply networks into sub-tiers.)Instead, firms rely on human-supplied (and often anecdotal) information from their top-tier and a fewlower-tier suppliers.

Introduction: The pandemic and national disasters have been affected the organizations to a great…

1. Define the problem described in this case study. What management, organization, and technology factors contributed to this problem? 2. To what extent can information technology solve this problem? Explain your answer. 3. What management, organization, and technology issues should be addressed to redesign supply chains to deal with major disruptions such as the coronavirus pandemic?