Category Management under COVID: “I’ve Never Seen Anything Like This”

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With that click bait headline, it was hard to ignore but as I read the article, it struck a major chord.  I had just heard the same exact thing from three different client CPOs in the last 2 weeks – they were all getting more and more concerned about lead times.  Supply Chains are clearly still disrupted significantly and we need to be on top of our game to help navigate through the disruptions because that creates a competitive advantage leading to better margins and higher market share.  Yes, our profession is also responsible for those metrics as well – we’re not just about cost any more!

“I’ve never seen anything like this,” said Lars Mikael Jensen, head of Global Ocean Network at A.P. Moller-Maersk, the world’s largest shipping company. “All the links in the supply chain are stretched. The ships, the trucks, the warehouses.”

The NYT article points to a number of challenges causing these issues:

  • Shortage of shipping containers across the globe
  • A number of them are stuck in Africa/South America where they were rushed to ship pandemic supplies but no ships to bring them back – they are busy on more lucrative routes
  • Container manufacturers(all in China) are scrambling to fill demand
  • Pandemic related demand in America has concentrated shipping on those routes – disinfectants increased by 6,800%!!!
  • Cost to ship container from China to California went from $2,500 to $7,000 – some paying 5 times what they used to!!
  • 90 days lead time to secure space on a ship for a container
  • Dockworkers and truck drivers in short supply because of virus and quarantines
  • To get your Peloton bike, it will cost them an extra $100 million in transportation
  • Empty containers are being rushed back to China and not waiting to load and ship grain like they typically do

And this is all happening as the economy has been in a slowdown during the pandemic.  Let’s extrapolate what happens when people start getting back to a slightly more normal life AND the stimulus package kicks in – the pent up demand will explode the need for shipping container leading to a bigger and bigger challenge. 

Those CPOs that I spoke to are spot on when they say that their gut is churning on this issue and all of us should pay attention to this.  I would encourage you to take another look at the concept of Response Lead Time (RLT) that we introduced a short while ago.  Here is the model that we drew and had some very interesting discussions during PERT workshops. 

The overwhelming conclusion at that time was that this was a very opportune time for all of us in our profession and sure enough the conclusion was accurate.  The value of our profession has never been higher.  A large number of you that we have spoken to in the recent past have indicated that your executives clearly see the value that you can and do bring and how your efforts were critical in keeping the operations going – whether it was getting PPE in the door or staffing a suppliers plant with your personnel to keep it going because their work force was decimated by the virus (true client story😊!!!)

Here is something simple you could do – Identify your five most critical suppliers and ask to be put in touch with their CPO/Supply Officer and ask them for their strategy to minimize supply chain disruptions for their operations and their five most critical suppliers (your Tier2).  And don’t be surprised if you are asked for the same discussion by your customers so prepare for it.  As an added bonus – you will be elevating the importance of those functions immediately in the eyes of senior executives at your suppliers.

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Dalip Raheja is President and CEO of The Mpower Group (TMG). Dalip has over 30 years of experience managing large organizations and change initiatives. He has worked across the spectrums of supply chain management, strategic sourcing, and management consulting.
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