We Need to Rethink Our Supply Chain Approach in Response to COVID-19

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Markets do not work without information, and neither do task forces.

Disasters disrupt supply chains. Last year, the Federal Emergency Management Agency noted: “Quickly reestablishing flows of water, food, pharmaceuticals, medical goods, fuel, and other crucial commodities is almost always in the immediate interest of survivors and longer-term recovery. 

Government emergency supply plans focus on local or regional disasters, such as forest fires, floods and hurricanes. However, the COVID-19 pandemic broke that mold. Supplies of personal protective equipment, test kits and ventilators have not fulfilled the demands of a nationwide event. Complaints of price gouging, counterfeit or low-quality items, and critical shortages dominate newscasts.

Basic economic principles are that prices go up when demand suddenly exceeds supply until production ramps up. For disasters, government creates a stockpile because people cannot wait. With the recent surge in cases, how can we fix supply chains today and ensure future resiliency?

At the heart of the issue is the artificial segmenting of information and operating relationships between federal, state, local, tribal, territorial and commercial systems. When the pandemic hit, both government and industry shifted into ad hoc mode, creating “task forces.” Task forces rely on personal relationships to address information and operational gaps. Lesson learned: Markets do not work without information, and neither do task forces. Some hotspots never had enough, while other places got excess supplies.

In 2020, this is simply unacceptable. A performance-based logistics approach drives metrics-based outcomes by incentivizing an integrated and responsive supply chain. The Defense Department has embraced a performance-based logistics digital approach that required modernizing and integrating dozens of systems to better forecast and manage surge needs. Other agencies need to work together to do the same now, recognizing that the pandemic is not going away and we cannot risk lives lost from not being prepared for a future event. 

Merely modernizing the IT is not enough. Effective operations require insight into supply chains both vertically and horizontally in order to identify binding constraints, which may be in materials, production, or distribution. Data must also be fully transparent and accessible with systems that enable metrics-driven continuous improvement. 

The recipe for successful COVID-19 supply chains include:

  • Data and analytics capabilities that combine for thorough, yet flexible support for key decisions, such as trending and optimizing sources of materials, producers, distribution mechanisms, pre-positioning locations, and resource allocation.
  • An integrated and scalable network of warehouses that can provide reserve storage, staging, kitting, and shipping coordination and execution, and can expand and contract depending on the need. 
  • A customer-ordering portal, accessible at all times and at all levels of users, with visibility into needs versus inventory stockpiles, fulfillment lag times, and order status.
  • Demand planning tools for data capture, forecasting, and strategic reserves planning.
  • Distribution tools for managing transportation and carrier selection, consolidated warehouse management, bill of materials tracking and visibility, proof of delivery collection, carrier scorecards and distribution/delivery issue/problem data collection.

It is possible to effectively use digital transformation techniques to scale supply chains for the COVID-19 pandemic, as well as future crises. These techniques provide the key insights that allow effective management of shelf life, optimize prepositioned assets, and manage stockpiles for items ranging from test kits to chemicals to ensure they are ready to issue at the time of need. Using modern solutions like data analytics, artificial intelligence, blockchain, and other IT modernization tools, government agencies will be able to source an end-to-end supply chain that assures equipment and supplies arrive where and when needed. 

Mark Forman, former U.S. Administrator for E-Government and Information Technology at the Office of Management and Budget (2001-2003), is vice president of digital government strategy at SAIC.

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