From lack of hand sanitiser to toilet paper, cargo stuck in ports, crops unpicked in fields and a work force relocated to their homes; organisations and consumers are adopting new approaches to deal with these shortages. With amazing flexibility and agility some firms have shifted their business models, invested in people and processes, explored new markets and created new products, whilst others appear to be lost and floundering.
Some firms have found that the key components and products they might need are just not available. This might be because their suppliers are temporarily/permanently shut down, transportation issues, or there just isn’t enough stock to meet demand. How are they managing these challenges?
Going local? This might mean (re)localising their sourcing (either regional or national) even when the costs are higher. A key question would be what happens to the ‘new’ suppliers when the break in the supply chain is repaired? Will firms stay loyal to those that helped them out?
Ramping up production. We see flour mills and toilet paper manufacturers etc all maxing out their production lines. Investments in short term ramp up will need to be repaid, and major alternations need to be worth the investment on a long-term basis. Flour mills and loo roll manufacturers are cleaning up right now (some literally) – but what about tomorrow?
New sources of supply. Across the UK firms are reimagining their business models to meet this demand. In Scotland the Wee Farm Distillery has switched production from Gin to hand sanitiser. You can even have the refill bottle posted out – just be careful as it comes in an ex-Gin bottle! Will this become a permanent side-line, or just an opportunistic diversion?
Extending business models. Other firms are being creative in switching their delivery modes and customer base. Wholesalers like Delifresh have moved from supplying cafes and hotels to household delivery. New items get added almost daily to their inventory. Will this investment pay off in a new customer base post this crisis? Even the big supermarkets have reimagined and invested with Morrisons quickly scaling out (with some teething issues) a click-and-collect service. Can these firms use these opportunities to take this market share long term?
Investing in stockpiles. We may see firms increase their inventory. Opposite to a just-in-time approach this will include costs – for storage facilities, monitoring and the cost of these stockpiled assets. Organisations need to be able to absorb these costs and to manage those inventories which might have expiry dates -like personal protective equipment. Longer term, will shareholders agree to absorb these costs?
Ultimately sourcing will be a balance between risk, costs and convenience. An article in the Journal of Psychology says it takes an average 66 days to form a habit – from the first day of lockdown that’s the 27th May. So I wonder how many of these changes become permanent?
Professor Diane Holt, University of Leeds, Centre for Enterprise and Entrepreneurship Studies and contributor to the ISR/Edge Hill Business School Research Training series.