FORT_1170x120_9-15-20

Supply chain questions that aren’t going away

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The supply chain, hitherto taken for granted if not ignored completely, has assumed unaccustomed prominence during the COVID pandemic. Disruptions in the flow of some health care products and consumer staples (most notoriously personal protective equipment and toilet paper), extending from stores all the way back to the source of raw materials, were a fact of life in the months after the virus emerged. Severely tested during that time, the supply chain bent but did not break.

The situation has improved markedly since then, but problems that require prompt attention remain; longer term, the pandemic raises tough questions about how the supply chain should be structured in the post-COVID world. Shortages persist even in health care, perhaps the most scrutinized part of the supply chain. For instance, inadequate supplies of syringes specially designed to extract the maximum amount of vaccine from vials have in recent weeks caused some doses to be discarded.

At the same time, retailers and suppliers in grocery and other CPG sectors increasingly find themselves at odds over incomplete orders and late deliveries. Disruptions in the labor market, shortfalls in raw materials and finished parts, and the high cost of transportation are resulting in unwelcome irregularities in the flow of goods. That, in turn, is helping fuel a big jump in the inflation rate, with consumer prices rising 4.2% in April from the prior-year level.

Some of that pressure is expected to subside as the number of COVID immunizations rises, cases decline and conditions return to normal. What won’t go away are concerns about the supply chain’s vulnerabilities and its ability to respond to sudden, dramatic shifts in demand, whether caused by another pandemic, a natural disaster or other factors. The global supply chain has helped provide access to a wide variety of goods at affordable prices, but it is subject to interruption at multiple points across a vast geography.

Will consumers and the CPG suppliers and retailers that serve them be willing to pay higher prices to source the products they rely on closer to home, thus making the supply chain more resilient in the event of an emergency? Or, as the pandemic finally recedes, will price reemerge as the consideration that overrides all others in the mass market? The response to those questions will go a long way toward determining what goes on at retail and how well equipped the nation is to deal with the next crisis.


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