Paradoxes & Mysteries in Virus-Infected Supply Chains: Hidden Bottlenecks, Changing Consumer Behaviors, and Other Non-Usual Suspects

Abstract

In the early onset of the pandemic, COVID-19, in the U.S., consumers experienced surprising shortages of essential, and unrelated at a first look to the pandemic, goods such as toilet paper, yeast and flour, and some of their favorite meat cuts. The “usual” explanations of “demand spikes,” foreign suppliers, trade tariffs, and “hoarding behavior” of panicked consumers, often were failing to explain their persistence. The shortages ended up being real “supply chain struggles,” with their true causes going beyond the “usual” ones, and revealing a set of deeper and “unusual causes.” Our detailed analysis of the affected chains identifies these overlooked failure factors and hidden causes. Such causes include demand shifts among market segments, siloed demand planning, bottlenecks in shared resources of transportation and distribution, and inflexible supply chain structures. We conclude on the lessons from the pandemic crisis on supply chains, and the implied challenges for building resilient supply chains for the future. We need to rethink what is the relevant “system” we plan and optimize (e.g., firm, industry, region, global factor resources, etc.). Building firm-specific redundancy of assets and operational flexibility might be prohibitive in the level of investment required for any one firm, or their financial stakeholders.