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Rotman Insights Hub | University of Toronto - Rotman School of Management

Distribution disruption: how to build a better supply chain after COVID-19

Read time:

Dmitry Krass, Gavinder Bhatia, Walid Hejazi, Opher Baron

Reacap of the Webinar:

Walid Hejazi welcomes operations management professors Opher Baron and Dmitry Krass to break down how the pandemic exposed the loss of supply chain resiliency across industries, and how your organization can improve its agility to prepare for future crises. As creators of the platform, they’ll explore how developing transparency can improve the supply chain flow and prevent the bullwhip effect. Rotman alumna Gavinder Bhatia, vice president and general manager of Cakes & Pies, Weston Foods, will join to share her first-hand experience of the unprecedented effects of the pandemic and frantic consumer behaviour on the grocery industry, and how her organization has responded.

Until a few weeks ago, many of us didn’t give much thought to supply chains. But the global pandemic — and the experience of scrambling for toilet paper and other supplies — has all of us thinking about how we get access to goods.

In Distribution Disruption: How to Build a Better Supply Chain after COVID-19, professor Walid Hejazi takes a closer look at supply chains with three experts in operations management.

In this virtual talk, professors Opher Baron and Dmitry Krass explain what supply chains are and how they can be redesigned to cope with disruptions. They also speak briefly about CovidPPEHelp, a new online platform developed by operations management and Statistics professors at the Rotman School. The platform eliminates many of bottlenecks inherent in the personal protective equipment (PPE) supply chain by improving information flows and providing a space for PPE suppliers, donors and customers to connect.

Also, Gavinder Bhatia (EMBA ’15), vice-president and general manager of Cakes & Pies at Weston Foods, provides an industry perspective. She recalls what was going on behind the scenes in the food manufacturing industry during the early days of COVID-19 crisis and what she and other manufacturers are thinking about now.

Here are a few of their responses to the big questions surrounding supply chains and COVID-19.

How do supply chains work?

Simply put, a supply chain is an interlinked chain of organizations that ensure that a product will make it on the shelf at the store.

“Supply chains are built to deliver products at minimal costs,” says Krass, who is the Sydney C. Cooper Chair in Business and Technology at Rotman. “That means squeezing out inventories and making sure deliveries are made just in time. There's no need to invest in extra production capacity because that will only create costs in the system.”

While efficient supply chains keep costs low, they aren’t set up well for shocks.

When demand for a product rises sharply and unexpectedly, it can trigger a bullwhip effect, where the signal for increasing demand becomes exaggerated at each step in the supply chain. This can lead to a lot of inefficiencies.

For example, if customers were to suddenly buy every last roll of toilet paper at a store, the retailer might react by doubling its normal order for the following week. The distributor might interpret this larger order as a signal that demand is growing for the product and double its order to the manufacturer. This pattern of increasing orders continues along the supply chain, resulting in a surplus and increased production costs.

How can we build better supply chains?

Most importantly, Krass says supply chains need to maintain better information flows and become more transparent.

When the demand for PPE surged, new suppliers emerged, as many manufacturers changed up their production lines to start producing equipment. The real challenges were — and continue to be — in matching suppliers with customers and making sure manufacturers are certified to make medical-grade equipment. This problem inspired Krass and Baron to launch CovidPPEHelp.

Additionally, building up inventories and incorporating idle capacity in the system would make supply chains more resilient. (However, figuring out who would cover the costs that these safeguards would incur is a separate and complex matter.)

“We need to have some ability to increase capacity on the fly and be ready with additional, flexible inventory that we can tap into,” explains Baron, who is a Distinguished Professor of Operations Management at the Rotman School.

“This crisis has exposed some of the risks that weren’t properly accounted for before.”

—Dmitry Krass, professor of operations management and statistics

The PPE shortage highlighted our reliance on international suppliers for certain products. Do we need to rethink global supply chains?

“The quick lesson here is that we need some sort of insurance policy,” says Baron. “We cannot rely totally on international supply for some products.”

Local supply chains need to be more flexible than they are now so that they can respond quickly in times of crisis. Baron suggests that governments subsidize training programs and pre-approve certain facilities for manufacturing essential products. For example, local breweries could be outfitted to produce medical-grade hand sanitizer and called upon in emergency situations.

“This crisis has exposed some of the risks that weren’t properly accounted for before,” explains Krass. “Until now, nobody thought we would need to have local suppliers or producers for hand sanitizer and face masks.”

When COVID-19 was declared a global pandemic, what was going on behind the scenes in the food industry? Were food shortages ever a concern?

During the early days of the crisis, Bhatia and her colleagues at Weston Foods — like most Canadians — wrestled with the feeling of uncertainty.

“I think we were all in the same boat, we were struggling with questions like: What if? What happens next? What does this mean?’” she says.

Weston Foods quickly prioritized protecting employees and keeping communities fed.

They secured masks and other protective equipment and adjusted production lines to allow for more physical separation between employees.

“We needed to make decisions very quickly about how we were going to increase the amount of bread on the shelves,” Bhatia explains.

They stopped production for products that required allergen cleaning or other downtimes to make sure units were making it to stores.

Ultimately, food shortages were never a major concern.

“I wasn't concerned about food supplies. I knew at a very minimum that we would be looked after for bread and baked goods because of how we were taking care of things as a business,” says Bhatia.

This webinar was originally recorded on May 15, 2020 as part of the Managing Uncertainty: Adapting to and learning from the COVID-19 crisis webinar series.

Opher BaronOpher Baron is a distinguished professor of operations management and the area coordinator for operations management and statistics at the Rotman School of Management. His research interests include queueing, applied probability, business analytics, service operations, inventory planning, and revenue management. Baron's work is published in leading journals and he has won several research and teaching awards and grants, including the 1000 Talents Plan Scholar from the Shanghai Municipal Government. He is an active guest speaker in the operations research and operations management community and serves on the editorial boards of several industry journals.
Dmitry KrassDmitry Krass is a professor of operations management and statistics, academic director, MMA Program at Rotman and the Sydney C. Cooper chair in business and technology. He consults extensively in the areas of predictive analytics, optimization of marketing communications and operational effectiveness. His research and teaching interests include facility location models, transportation, reliability and inventory location modeling and humanitarian logistics. He is also interested in environmental modeling, including regulation of pollution fines, marketing mix management and optimization, and predictive/ prescriptive analytics using big data and other tools in business decision making.
Gavinder BhatiaGavinder Bhatia, (EMBA ‘15), vice president and general manager, Cakes & Pies at Weston Foods. Gavinder is a cross-functional leader with over eighteen years of experience in the consumer packaged goods (CPG) industry working at companies such as Estee Lauder, Kraft and now Weston Foods where she leads the North American Cake & Pie Categories. In 2019, she was named in the Top 100 Influential Women in Canadian Supply Chain from the SCMA.
Walid HejaziWalid Hejazi is an associate professor of economic analysis and policy at the Rotman School of Management. He has researched, advised, and testified extensively on global competitiveness, and is currently working on a series of studies which shed light on the competitiveness and productivity of Canadian firms.