Higher Stakes for Supply Chain Management

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Tuesday, March 23, 2021
By Saibal Ray
Photo by iStock/kiattisakch
Distribution of the COVID-19 vaccine presents a daunting challenge for supply chain managers—and a real-world case study for our classrooms.

For the past several decades, consumers in most of the developed world have operated under the assumption that necessities like food, cleaning supplies, and medical devices will always be readily available to purchase when needed. Then, the first wave of the COVID-19 pandemic hit. Consumers began panic-buying staples such as bottled water, flour, and toilet paper, creating temporary shortages. As basic necessities were swept off the shelves of our local supermarkets, we recognized just how much we had taken efficient, well-functioning supply chains for granted. 

In the next wave of the crisis, we had even greater cause for concern. Hospitals began reporting shortages of respirators, personal protective equipment, and other lifesaving devices. In 2020, we saw the ways that supply chain management can be a matter of life and death.

As a researcher in this field, I have found that few people are aware of the long, circuitous journey that products take from their origins to their destinations. Across industries, most supply chains involve a complex web of organizations, from multinational corporations to small brick-and-mortar retailers. At every mile marker along the journey, suppliers and intermediaries must consider wide-ranging factors, from changing customer preferences to country-specific regulations and norms. On top of these factors, suppliers also must protect the supply chain from potential disruptions from natural disasters, political unrest, and health-related events like COVID-19.  

Ensuring the smooth flow of materials, information, and funds across different intermediaries—at a sufficient pace to meet fluctuating consumer demand—requires tremendous expertise. That’s true even for the simplest consumer products. Now that countries are rolling out the COVID-19 vaccine, we must confront a level of complexity on a completely different scale.  

The Challenge Before Us

Early in the pandemic, the sophisticated supply chains of retail giants like Amazon and Walmart played a central role in making protective face masks widely available. But that sophistication has its limits. The approval of the COVID-19 vaccine in the final days of 2020 brought hope to a waiting world that the pandemic might finally be coming to an end. But going from vaccines to vaccination—i.e., distributing the vaccines across numerous operational hurdles to not millions, but billions of people—is a staggering logistical challenge.

It’s not just the vaccine that must work its way through supply chains. Every box of vaccines requires roughly eight to 10 boxes of accessories, including vials, syringes, dry ice, and freezers. Furthermore, the Pfizer vaccine must be kept frozen at around minus 70 degrees Celsius (minus 94 degrees Fahrenheit), and Moderna's at around minus 15 degrees Celsius (minus 5 degrees Fahrenheit), adding a new dimension to the typical costs and methods of transportation.  

At every point in the journey from manufacturer to vaccine administrator, the need for tightly orchestrated timing heightens the risk of bottlenecks. Even the most seasoned supply chain manager will find it a dizzying task to ensure that the right products are in the right place at the right time, all while keeping in mind the vaccines last only days once unfrozen and just 12 hours at room temperature.

We are now facing a challenge that, ironically, might be the result of one of supply chain management’s most successful inventions: the just-in-time inventory system. Over the years, academics and practitioners have invested considerable time and energy into managing risk and cutting costs in global supply chains by using advanced software systems. With these systems, companies have ensured that their suppliers maintain the absolute minimum amount of inventory required to keep the supply chain stable.

During normal times, the cost efficiency of a just-in-time model has lowered costs for consumers and boosted profits for companies. Unfortunately, that same efficiency has proven disastrous during a global pandemic.

During normal times, the cost efficiency of a just-in-time model has lowered costs for consumers and boosted profits for companies. Unfortunately, that same efficiency has proven disastrous during the global pandemic, when demand spiked in ways that the system was not designed to handle.

As countries compete for a limited supply of vaccines, a just-in-time mindset is bound to result in shortages. If even one type of vaccine accessory is in short supply, we will see boxes of expired, unused vaccines begin to pile up. A dose wasted can mean a life is lost, so the vaccine supply chain carries monumental risk.  

Problems also can occur on the demand side. For example, in rural areas where demand is relatively low, vaccines can go to waste if fewer people than expected sign up to receive the vaccine or if people miss appointments altogether. In contrast, in urban areas, where demand is higher, people can wait for long periods of time before appointments are available, risking exposure to the virus with every day that goes by.

Our Path Forward

Leaders at the state and national levels are playing key roles in coordinating the rollout of the first vaccines, especially to high-risk populations like healthcare workers and long-term-care residents. Many local governments have successfully repurposed several industrial facilities to support this effort.

At the same time, leaders must continue to refine their procurement and distribution strategies—including creating a centralized database to chart supply availability. They will need access to experts who are adept at navigating the complexity of supply chain management in the context of COVID-19. Academics at business schools worldwide are helping companies meet this challenge, by conducting research on how to incentivize people to take vaccines, allocate doses equitably, and improve distribution strategies. Some researchers are also exploring whether it makes sense from a public health perspective to delay the second shot of Pfizer or Moderna vaccines, so that more people can receive their first doses.

The pandemic also is serving as a perfect real-world case study for teaching supply chain management to the next generation of business leaders. On the one hand, business schools teach most of the core components associated with vaccine distribution, such as optimization, risk management, and data analysis. But on the other, the pandemic has brought many new questions to light that our students must explore.

For example, how can supply chains anticipate and react to unpredictable consumer behavior during a crisis? With multiple vaccines available, each with different levels of supply and effectiveness, how should providers decide which vaccine is given to which recipients?

Healthcare providers and governments also must prepare for potential dissatisfaction among the population, with many people “shopping” for their vaccine of choice. For instance, there are reports from Europe and Canada that some people are refusing to receive AstraZeneca’s vaccine, opting to wait for Pfizer’s vaccine, which reports a higher efficacy rate.

On a macro scale, questions abound when it comes to balancing the risks and benefits of global versus local supply chains. But from a teacher’s perspective, I think one of the pandemic’s silver linings is that it ultimately forces professors and students alike to think about national and global supply chain management in a more holistic, nuanced way. It also provides us with a wealth of practical examples that make theoretical concepts come alive in the classroom.

Preparing Students to Contribute Solutions

While theoretical discussions have value, they can only come alive when students have the chance to learn firsthand about the problems companies are facing. That’s why business schools must partner with companies on real projects that will train students in supply chain management techniques.

At the Bensadoun School of Retail Management at McGill University, we recently established a master in management in retailing degree, designed to equip students with the tools and techniques they need to assume leadership roles in a rapidly evolving retail environment. In June 2020, we also invited student teams from across Canada to compete in our first-ever Retail Innovation Challenge.

One of the pandemic’s silver linings is that it ultimately forces professors and students alike to think about supply chain management in a more holistic, nuanced way.

In both of these contexts, we are using the pandemic as a teaching tool. During the competition, for example, 80 teams from different academic fields came together to generate actionable solutions to real problems faced by small businesses—including two restaurants, one coffee business, and one grocer—as they emerge from the COVID-19 pandemic. As 2021 progresses, we hope to provide similar support to healthcare providers as they distribute the COVID-19 vaccine.

The Bensadoun School also has started its Retail Thought Leader series, which invites academic leaders and practitioners to share their insights on issues faced by retailers during the pandemic. So far, our students have heard from representatives of the Stanford Graduate School of Business, the Wharton School at the University of Pennsylvania, McKinsey & Company, and Walmart. We are now organizing similar seminars from thought leaders in the areas of vaccine (development and epidemiological impact) and vaccination (on improving the supply chain and incentivizing more vaccine uptake).

Challenge of a Lifetime

The task of delivering the COVID-19 vaccine presents an unusual level of complexity, but supply chain managers must rise to the occasion to prevent an even greater loss of life. As they undertake one of the greatest challenges of their lifetimes, they need support from professionals with deep expertise in supply chain management. 

As an old saying goes, every problem is an opportunity in disguise. The COVID-19 pandemic has presented us with both a challenge and an opportunity to reassess critical supply chains. Business schools can create as many opportunities as possible for students to engage with retailers to learn the lessons of this difficult season for the industry. Our students and faculty can hear about retailers’ challenges and help devise solutions.

In other words, business schools can be indispensable partners to a society emerging from this pandemic. By training students to meet increasingly complex distribution challenges, we can help ensure stable, reliable supply chains into the future.

Saibal Ray
James McGill Professor, Operations Management, McGill University Bensadoun School of Retail Management
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