Procter & Gamble, the maker of Charmin toilet paper, was prepared for thousands of scenarios – including earthquakes, fires, and cybersecurity attacks – but not for a disruption greater in magnitude than all three combined: a global pandemic.
As COVID-19 spread throughout the United States in March, panicked shoppers snapped up what precious paper products they could find. Meanwhile, P&G’s “just-in-time” manufacturing and distribution operations meant it had no more than two or three weeks’ worth of toilet paper to sell.
Other U.S.-based paper goods manufacturers, along with makers of hand sanitizers and cleaning products, experienced similar shortages, not only due to the unanticipated and extraordinary demand, but also because of their heavy reliance on overseas suppliers. P&G had, in fact, warned investors in February that virus-induced factory shutdowns in China, where it had nearly 400 suppliers shipping more than 9,000 materials, would affect more than 17,000 products.
As shipments of products worldwide slowed or stopped entirely, it soon became clear that global supply chains had snapped. Companies everywhere were in trouble. But not every business.
The vulnerability of global supply chains
For the past few decades, global supply chains worked because they were mostly reliable and cost effective. Plentiful, cheap labor reduced costs, and factories became more efficient, making companies more profitable. Those years were stable, too. GDP grew steadily and with few supply or demand shocks. But as chaos reverberated through the pandemic-stricken world, businesses soon learned that their reliance on the trusty global model had actually increased their risk in ways that few had considered.
“No one was looking at the risk of having all of their sources of supply coming from Asia,” says Lisa Anderson, president of Claremont, CA-based LMA Consulting Group, Inc. and manufacturing expert known for creating supply chain resiliency.