Supply Chain Lessons from COVID

Supply Chain Lessons from COVID

Jun 1st 2020

There has been no escaping the vulnerability of supply chains these past twelve weeks. This is true whether your biggest issue was that you could not get your hands on enough toilet paper or if you were a first responder facing the worst that COVID brought to bear on supply chains - lack of essential PPE.

EcoEnclose faced our own supply chain challenges, leading to some out of stock issues, which then became concerns for any companies who were trying to order those SKUs. Early on, as COVID shut down Chinese manufacturing, we were in a good spot. Even as COVID shut down much of the US, we fared well and were pleased that our focus on domestic manufacturing partners led us to avoid the initial supply shocks faced by many other businesses. But over time, a convergence of trends changed this.

  1. Shutdown of overseas manufacturers meant that many more ecommerce businesses were looking for domestic packaging.
  2. Our manufacturing partners reduced their capacity as they (like all of us) staggered shifts to allow for social distancing and gave employees generous PTO policies so they could stay home when sick or to take care of kids at home.
  3. The overall demand for ecommerce packaging spiked, as all types of businesses found online sales to be their only revenue channel for three months.

We managed out of stock instances with two strategies: (1) Proactive communication with customers wherever possible and (2) sending alternative sizes or offering temporary (less than ecologically ideal) substitutes that could be used instead.

With the majority of our offerings now back in stock, this is the time to reflect on the lessons we’ve learned. In this article we share some insights we’ve gained on how to build a more resilient supply chain.

  1. Establishing flexibility in specifications: This means evaluating your raw inputs or “Bill of Materials” through the lens of: “Are there opportunities for me to make my requirements more flexible if need be?” By knowing your opportunities to swap and adjust ahead of time, you are much better equipped to calmly and proactively make changes when shocks hit your supply chain. Examples include:
    1. Can you relax your specifications on an item, either in general or if this became necessary due to supply constraints?
    2. Can you reuse any materials to help reduce your need for new inputs?
    3. If necessary, can you swap any inputs for something else that is easier to access?
  2. Being five steps ahead at first sign of issue; and knowing that yes, this can happen to us: Our area began shutting down on March 20th (and we made drastic changes to our own operation on March 13th). While this felt sudden at the time, looking back, we should have known it was coming and already made contingency plans. Going forward, may this be a reminder to all of us that we are not protected from disaster. External forces can and will disrupt your business. Take the time to disaster plan ahead of time. Then, at first sign of a potential pending disaster, take your head out of the sand, review your disaster plan and starting putting key steps in motion.
  3. Building transparency into the supply chain: Knowing everything about our supply chain helps us react more quickly to news of potential disruptions. One small example that EcoEnclose faced: The hot melt that we use to glue our boxes was recently moved to an overseas manufacturer. This is a very small aspect of our operation (we order this glue every 1-2 years and it represents a fraction of a weight of an RSC shipping box). However, if we run out of it, we can’t make some of our most popular boxes! We learned about this overseas manufacturing transition through a newsletter the supplier sent in the midst of COVID - letting us know that they were out of stock and wouldn’t have supply for another few weeks. While this wasn’t an immediate problem as we had plenty of glue on hand, it was both jarring to learn of their transition and to learn that we easily could have faced a major shortage had this come at a different time. Most of all this was a reminder to not just stay on top of the primary aspects of our product set, but to conduct regular audits of our entire supply chain - including those seemingly small things - and identify potential risks or concerns at each step.
  4. Localizing and diversifying suppliers: EcoEnclose has spent years investing in a domestic supply chain. One of our manufacturing partners is located in Canada and our Cello Tape is manufactured in Europe. Outside of these two anomalies, all of our goods are manufactured across a dozen partners in the USA. This put us in a better position than many of our counterparts who rely on overseas factories. But as US operations faced issues in March and April, we realized that we can go one step further in strengthening our supply chain by identifying alternative partners for our key product lines.
  5. Remembering that cost is not the only thing that matters: EcoEnclose has never been a “lowest cost at all costs” business. But many businesses see cost reduction as their main decision driver. Now more than ever, we are reminded of the importance of Total Cost of Ownership. Yes, something can be the lowest cost, but if it carries with it a non-transparent production stream and 6 month lead times, the total (risk adjusted) cost of ownership may be much higher. We are hopeful that COVID may recenter businesses to consider the bigger picture when deciding which partners to work with.
  6. Vertically integrating key elements of your business: One of the most inspiring things that has come out of COVID is the speed at which so many businesses have pivoted by making masks, ventilators, protective gear and hand sanitizer. This has shown how ready and able companies are to step up and fill voids that present themselves. Many businesses turned this energy inward as well, finding ways to produce for themselves things they typically source externally. With 3D printers, new machinery, or internal skill building - companies can produce their own inputs, building their own resilience, increasing the number of people they employ, and often increasing their own sustainability.

What takeaways have you learned? Send your insights and reflections to [email protected] so we can add your voice and advice to this piece!