How to Fix Broken Supply Chains | Dustin Burke | TED

The Great Toilet Paper Shortage: Lessons from 1973

Introduction to the Shortage

• The speaker recalls a strange experience of entering a supermarket with empty shelves, particularly noting the absence of toilet paper.

• Clarifies that there were no raw material shortages or manufacturing defects contributing to this situation.

• Attributes the shortage to panic buying by everyday consumers rather than actual supply issues.

• Highlights that supply chains struggled to keep pace with sudden demand spikes.

• Discusses how rumors about shortages can quickly become reality.

Historical Context

• The speaker emphasizes that this discussion is not about COVID-19 but refers back to the toilet paper shortage of 1973 caused by a joke from Johnny Carson.

• Contrasts past and present supply chain challenges, asserting that today's problems are significant but solvable.

Understanding Supply Chains

• Defines a supply chain as the complex journey items take from raw materials through various suppliers to manufacturers and finally retailers.

• Explains how distributors and carriers play crucial roles in moving finished goods to consumers.

• Notes variations in supply chain complexity, from simple local purchases (like strawberries at farmers' markets) to intricate global networks.

Resilience vs. Efficiency

• Discusses common advice for improving supply chain resilience post-crisis, including diversifying risk and better forecasting.

• Questions why more companies haven't implemented these strategies despite their apparent benefits.

• Suggests competing priorities and intense competition hinder companies from adopting resilience measures during crises.

Innovative Solutions for Supply Chain Resilience

Sharing Risk

• Proposes sharing risk among industry players as a way to enhance resilience without sacrificing efficiency.

• Introduces concepts like radical transparency and automated recommendations as potential solutions.

Building Buffers

• Advocates for creating buffers in inventory management so recipients aren't left empty-handed during disruptions.

• Acknowledges that while companies carry less backup inventory now due to specialization, it complicates responsiveness when demand shifts occur.

Case Study: Toilet Paper Manufacturing During COVID

• Points out that toilet paper manufacturers had capacity but lacked appropriate types of products for consumer needs during COVID.

• (text omitted)

Insurance Analogy

• Draw parallels between insurance models and potential collaborative approaches within supply chains where costs are shared among participants.

• Emphasizes pooling resources for low-probability yet high-impact events similar to car insurance practices.

Importance of Transparency

• Stresses the need for improved transparency in supply chains so stakeholders can identify shared risks effectively.

Microprocessors and the Automotive Supply Chain

Impact of COVID-19 on Microprocessor Supply

• Microprocessors are essential for modern vehicles, but during the early COVID-19 pandemic, auto manufacturers canceled orders due to anticipated drops in car sales.

• Simultaneously, demand surged for microprocessors in consumer electronics as parents purchased tablets for remote learning and workers bought laptops.

• A fire at a chip plant further exacerbated the situation, leading to backorders just as car sales began to recover.

Broader Supply Chain Issues

• The automotive industry's inability to secure necessary microprocessors is largely unrelated to its own market dynamics; it reflects broader supply chain vulnerabilities.

• Risks in supply chains extend beyond direct competitors or customers; they also involve companies sharing the same resources.

• For instance, Ford may not see PlayStation 5 as a competitor, yet both could be vying for limited microprocessor supplies. This highlights the need for improved supply-chain transparency.

Understanding Supply Chains

• Companies must understand their suppliers' suppliers and where raw materials originate to navigate competition effectively.

• Often perceived diversification in supply chains can mask underlying dependencies on single sources of critical inputs.

• Acknowledging that we operate within a "supply web" rather than distinct chains is crucial; failures among key players can disrupt multiple sectors simultaneously.

Enhancing Supply Chain Management

• Effective supply-chain management relies on accurate data mapping of inputs across industries to build resilience against disruptions.

• Supply-chain managers act as planners who analyze information and adjust strategies based on expected demand versus available supply. Control towers centralize this data for better decision-making.

Leveraging Technology in Data Analysis

• While data is vital, excessive amounts can overwhelm managers; thus, technology is needed to streamline analysis processes effectively. Advances in AI and machine learning enable predictive analytics that can identify potential issues before they escalate into crises.

Case Study: Plastic Shortages

• Recent shortages of plastic resins stemmed from decreased production due to COVID outbreaks followed by natural disasters impacting manufacturing capabilities significantly over time (e.g., Hurricane Laura).

• Increased demand for plastic packaging during grocery surges compounded these issues, highlighting how interconnected factors create vulnerabilities within supply chains.( t = 537 s)

Recommendations for Improvement

• Automated systems could have flagged risks associated with supplier reliability and logistics challenges earlier in the process—similar to how airlines manage passenger delays through real-time data analysis.( t = 568 s)

• By utilizing technology effectively, businesses could proactively address potential disruptions instead of reacting after problems arise.( t = 580 s)

Learning from Past Mistakes

• Historical events like the H1N1 outbreak illustrate recurring failures in managing healthcare supplies such as N95 respirators during crises.( t = 608 s)