Supply Chain Influences, Impacts and Perspectives. 2022 NFPA Industry and Economic Outlook Conference

1. 2022 NFPA Industry and Economic Outlook Conference
Zal Phiroz, PhD
AUGUST 16, 2022

2.  Background: Supply Chain, Operations, Data Analytics
 Academic and Industry experience:
 Procter & Gamble, TELUS, Fortune 500 Supply Chain Consulting
 Faculty appointments at Harvard, USC, UCSD, MSU
 PhD – Supply Chain Management
 Areas of specialty:
 Retail optimization: Shrink / Defensive Merchandising analysis
 Risk forecasting of alternative supply chain design
 Quantification of impact of incorrect forecasting / demand
 Demand / consumer behavior projection

3.  Understanding conventional supply chain solutions / strategies
 Exploring the real drivers of supply chains
 Case study discussion and analysis
 Discussion of changing supply chain perspective
 Discussion on impact (i.e. Why is what we are talking about
important?)

4.  9/11 (2001)
 Heightened security – transition points, cargo transport
 Tourism, airline industries hit hardest
 Global Financial Crisis (2008)
 Collaboration with suppliers – SRM focused
 Flexibility– distribution, collaboration
 Thailand Floods / Japan Tsunami (2011)
 Global industrial production reduced by 2.5%
 Electronics (HDD) / Automotive market hit hardest
 Heightened focus on data driven demand modeling

5.  Economic Impact to Consumers
 Morgan Stanley projecting a GDP decline of 30.1% in April-June
 Unemployment spike of 14.7% = job loss of 20.5M as of April 2020.
 Potential lowered consumer purchasing power may result in lower
access to credit
 Lower spending on air travel, food delivery, public transport,
restaurants, retail etc.

7. Impact on the Automotive Industry: Navigating the Human and Business Impact of COVID-19 April 2020 1) MarkLines Report, March 16th; 2)
Automotive News China, March 18th, 3) IHS Markit Report, April 1st

8.  Changes in US manufacturing output
 Output close to that of the 2008 Global Recession
Source: fred.stlouisfed.org/series/IPMAN

9. Changes in consumer behavioral patterns
Economic uncertainty = conservative spending
Changes in manufacturing cycles
Employee concerns (e.g. Tyson Foods)
Drastic demand forecasting vulnerabilities (e.g. automotive,
hand sanitizer, PPE etc.)
Slowdown in Chinese manufacturing (13.5% decline in
Jan/Feb 2020 vs. Jan/Feb 2019)

10.  Annual inflation rate in the US (2012 – 2022)

11.  Looking back, were these concerns valid? What issues are we
currently facing?
 Various topics emerge as we discuss the concept of improving a
supply chain:
 Distribution optimization
 Speed of production
 Workforce
 Cost / economy etc. etc.
 Are these supply chain optimization drivers? What do all of the
above options rely on? What is the most important function of the
supply chain?

12.  Consider the impact of COVID-19. Think about the following:
 How do businesses (irrespective of their role in a supply chain)
navigate an event like COVID-19?
 When there are delays in the distribution of goods, the prolonged
storage of these goods may result in product damage,
depreciation, or other issues. Who’s responsible?
 What issues could arise from the necessity of creating more
flexibility in fulfillment (e.g. online distribution)?

13. Yellow = Customer
Blue = Manufacturer
Green = Distributor
Orange = Supplier

14.  You are either a supplier, a manufacturer, a distributor or a customer, and
business has been steady and relatively predictable over the past 5 years.
 It’s April 2020, and COVID guidelines and restrictions have just been put in
place with very little notice, forcing you to make drastic changes to your
operation.
 Part 1 (5-8 minutes):
 What are the top 3 things you need from your direct supply chain partners
(upstream and downstream)?
 Part 2 (5-8 minutes):
 How do you respond to the needs of your supply chain partners?
 Are you able to accommodate the needs of your supply chain partner without
negatively impacting your business?

15.  Consider the impact of Inflation. Think about the following:
 What changes do businesses need to make (irrespective of where
they are in the supply chain), in light of rising inflation?
 Which areas of the supply chain are impacted by inflation?
 What issues could arise from the necessity of creating more
flexibility in fulfillment (e.g. increasing prices)?

16.  It’s July 13th, 2022. Fuel prices have skyrocketed, and inflation is at 8.6%
(the highest point in decades), which has resulted in consumer behavior
pattern changes, forcing you to make drastic changes to your operation.
 Part 1 (5-8 minutes):
 What are the top 3 things you need from your direct supply chain partners
(upstream and downstream)?
 Part 2 (5-8 minutes):
 How do you respond to the needs of your supply chain partners?
 Are you able to accommodate the needs of your supply chain partner without
negatively impacting your business?

17. Is there a disparity in the power to resume operations at
different nodes of the supply chain? What about when we
consider large vs. small players?
Are all nodes of the supply chain equally impacted?
Is collaboration in the supply chain still a priority? (e.g. is the
customer inclined to adjust operations based on manufacturer
constraints?)
Is there a coordinated effort (e.g. do all suppliers want the same
thing from manufacturers), or is there chaos?
What happens next?

18. Shorter supply chains due to COVID threats
Stronger reliance on local sourcing and production,
potentially resulting in higher costs, and higher prices
Reliance on third party distribution options as a result of non-
traditional retail purchasing behavior
Supply chain design change due to Inflation/cost threats
Stronger reliance on lower cost options
Increases in pricing throughout the supply chain (all the way
to the consumer).

19. Permanent consumer behavior shift
Purchasing behavior (online etc.)
More reliance on areas focused on direct to consumer
distribution (e.g. online presence, last mile delivery)
Consideration of transportation costs (fuel prices etc., and how
these costs are integrated into the price)
Stronger reliance on regional sourcing and production to
avoid future pandemic risks
Larger focus on local storage/production (which increase cost)