One of the biggest stories in the last half of 2021 was the supply chain. It seems everyone was impacted by shortages or delays in getting a product from a manufacturer to a consumer, and that hasn’t changed much as we’ve entered 2022 and still encounter empty store shelves and long-delayed furniture deliveries.
Katie Wowak, associate professor of IT, Analytics, and Operations, at the University of Notre Dame’s Mendoza College of Business, has spent years studying the field of strategic supply chain management, with a focus on supply chain knowledge and disruptions. She says that snarls across the three key components of the supply chain - sourcing, manufacturing, and logistics - are all playing a factor in the shortages we’re seeing, but there are some things we, as consumers, and companies can do to help alleviate the problem.
Thinking back to the early days of the pandemic, consumer purchasing took on a new life as schools and businesses transitioned online. Demand for products shifted to reflect the extra time or lack of access people had to public spaces with an increased demand for home fitness equipment, baking, and craft products to fill extra time, and supplies like hand sanitizer.
Toilet paper, though, is what everyone will remember.
“It really didn't make a whole lot of sense,” Wowak said. “The demand for toilet paper skyrocketed, but it was much higher than the actual consumption of the toilet paper being used. It was panic buying and hurting behavior.”
Panic buying is when people buy significantly more of a product than what they need, in anticipation of a disaster or potential disaster. Seeing others panic buying an item, leads to hurting behavior. “We all kind of looked around and said, well, people are buying crazy amounts of toilet paper, I should do the same thing,” she said. “But it didn't make sense from a rational perspective.”
Ideally, she said, after the initial panic buying at the beginning of the COVID-19 pandemic consumer activity would have shifted to not buy more than what is needed. “Buying what you were going to be using but not overbuying … because then there’s enough to go around for everybody,” Wowak said.
Those early shortages were also exacerbated by common manufacturing processes and inventory management.
“A lot of companies use something called “just in time manufacturing,” which is when they get inventory when they need it for manufacturing. They don't keep a lot of inventory on hand, just in case,” she said.
And while just in time manufacturing works well under stable conditions, it is time-consuming to pivot to an increase in demand, especially when overseas suppliers were already being affected by the pandemic.
“Even if a company's first-tier suppliers for the manufacturing plant are domestic, most likely their second or third or even fourth-tier suppliers are located overseas, primarily in China,” she said. “We're having a lot more delays with shipping materials from those suppliers who are overseas to manufacturing plants domestically.”
Many manufacturers are shifting from the just in time approach to keeping more inventory on hand, a small change that can have big consequences to shore up the supply chain, Wowak said. Companies may consider other long-term strategies as well, including geographically diversifying their suppliers so if a plant shuts down in one part of the world, they can still get materials from another supplier.
As we get further into 2022, though, Wowak expects the supply chain to stabilize, especially after the holiday rush, giving companies a chance to catch up with demand and hopefully increase their inventory on hand to prevent future supply chain breakdowns. She warns, though, that consumer expectations should be tempered.
“We're used to getting a lot of the things that we ordered pretty quickly,” she said. “Amazon has gotten people used to the two-day delivery, but with the pandemic, we might just see longer lead times moving forward in general, it might not ever come back to the really quick delivery that we're used to seeing.
The takeaway for consumers is just to plan ahead really, and consider longer lead times from the products that you're purchasing.”
Learn more about Kaitlin's work at https://go.nd.edu/45407e.
Notre Dame Stories highlights the work and knowledge of the University's faculty and students. This podcast features interviews with Notre Dame faculty members who can lend insight into some of the major national and international stories of the day, as well as pieces that show the breadth of the life and research at the University.
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