The business community has leapt into action to help fight the novel coronavirus pandemic. Automakers like Ford, GM and Tesla are retooling their factories to produce ventilators. 3M and GE Healthcare are working to boost production of masks, face shields and other protective equipment for healthcare workers. Even small-scale “makers” and volunteers armed with nothing more than sewing machines and 3-D printers are pitching in.
While these efforts are heroic, business leaders can’t simply snap their fingers and transform their production lines and supply chains overnight. It could take months, for example, for automakers to fully ramp up production of ventilators — well after the (first) coronavirus peak hits the U.S.
What can business leaders do to respond as rapidly and effectively as possible? This pandemic is a rare event and the response will have to be equally unprecedented, requiring innovative partnerships, buy-in from workers and strong government leadership.
Unorthodox Partnerships Are Essential
Retooling or ramping up production operations takes time, particularly for complex products like ventilators. Unorthodox partnerships, flexible strategies and cross-training of the workforce can speed the process along by combining expertise and capabilities from different industries and parts of the supply chain. For instance, one surprising entrant into the ventilator race is Dyson. They collaborated with TTP, a medical technology company, to leverage their expertise in air flow devices like vacuum cleaners and hair dryers and designed a new type of ventilator, CoVent, in just 10 days.
Such partnerships can help companies from outside healthcare navigate the sector’s highly regulated landscape and meet relevant licensing, testing and quality standards. Automakers are partnering with medical device companies like GE Healthcare, Ventec and Medtronic not only for their technical expertise, but also for their already-approved ventilator designs that won’t require a lengthy approval process. Meanwhile, pharmaceutical giant Pfizer has offered to put the weight of its drug development expertise behind anyone working on promising coronavirus treatments, from small biotech firms to academic researchers and government agencies.
Strategic partnerships with suppliers are also critical, as supply chains today often depend on multiple components from across the globe. Coronavirus-related disruptions to production, particularly in China, combined with increased demand, led to intensified competition among manufacturers to acquire necessary parts. When capacity is tight, it’s common for suppliers to give preferential treatment to manufacturers they have ongoing relationships with, which often have to be built over years. Having the right partnerships in place will help ensure companies have access to the parts they need. Those struggling to find components or shave valuable weeks off production times may also have to get creative by simplifying or redesigning products or manufacturing parts in-house.
Workers Are Critical Allies
Pivoting American industry to help fight the coronavirus will only succeed with the buy-in of the dedicated employees who will be on the front lines. Many are eager to help, with some employees at GE going so far as to hold “socially distant” protests demanding their company put them to work producing ventilators. Manufacturers will have to find ways to prepare and protect their workforce as they ramp up production.
Workers will face a steep learning curve as they are called on to manufacture different kinds of products or shift into unfamiliar industries. Some may get sick or burnt out as they strain to meet intense demand. As companies retool production lines, they also need to revise worker safety protections to accommodate necessary social distancing and revisit policies like sick leave and access to health care. They can look at what other businesses, such as grocery stores, are doing to protect their workers. With better data on the spread of the COVID-19 virus, they may be able to allocate production to plants located where infection rates are lower.
Workers are critical allies in this fight. Keeping them safe and engaged is essential to containing the spread of the disease and to ensuring production can flow smoothly. If companies don’t address worker well being, including protective equipment and sick leave, they may face strikes demanding better protections like those recently held against Amazon, Whole Foods, and Instacart.
Government Leadership is Imperative
This unprecedented fight will require a level of government leadership and central planning that will be unfamiliar, and possibly even uncomfortable, for many American businesses. Companies typically manage their supply chains by considering the cost versus risk trade-offs they face, and both costs and risks are highly uncertain right now. No one knows how long the pandemic, and its economic ramifications, will last. Businesses are understandably reluctant to make heavy investments in new (or even existing) production while conditions are so unstable. Some may leap at coronavirus-related opportunities, while others may be hesitant to turn their attention away from normal operations and risk joining a too-crowded field.
In exceptional times like these, government should step in to minimize risk and uncertainty and align supply and demand. The Defense Production Act is one powerful tool for coordinating production, buttressed by central planning from FEMA’s Supply Chain Stabilization Task Force. If used properly, these mechanisms can help provide manufacturers with a clearer sense of what and how much they should be producing, minimize risk by guaranteeing someone will purchase these goods, and maximize effectiveness by distributing supplies to where the need is greatest.
More clarity and guidance from the federal government could further reduce any lingering hesitations about pivoting production. Price guarantees, for example, could provide protection on both sides of the equation — companies know they won’t lose money on new investments, while city and state governments have a safeguard against price gouging.
Turning the Ship
In our years of studying supply chain management, we have never seen anything simultaneously disrupt so many levels of supply chains across the globe. While large-scale disruptions normally affect the supply side, what is unique in the current situation is that both demand and supply are being impacted.
Now is the time for business leaders to act, but pivoting American industry to fight coronavirus will be a bit like turning a massive battleship. It’s not easy or quick for manufacturers to retool production lines. But even more challenging is the need to transform their thinking – to take more risks, get creative, stay flexible, and be open to unexpected collaborations and solutions.
In our collective race against the coronavirus clock, the business community needs innovative partnerships, worker buy-in, and government leadership. Taking risks right now is scary but could lead to high rewards: ethically, financially, and in the form of consumer loyalty toward manufacturers who step up to help the nation in a time of crisis.
Tobias Schoenherr, Sri Talluri and Vedat Verter are faculty members of the Department of Supply Chain Management.
