Logistics and trade in the time of corona: together we are stronger

Difficult times know no law. In times of need you get to know your friends (“a friend in time of need, is a friend indeed”). There is now a clear common goal which is namely to "defeat" the common enemy the coronavirus and all its imminent consequences. We can only do this together. Within logistics, supply chain and international trade, we have long known what this looks like but now we must come together and act. Your chain partners are exactly that; they are "friends" with whom you could achieve something together that you will never succeed in achieving on your own. Below are several points for attention.

Bullwhip Effect- Human Behavior 

The coronavirus is unavoidable, but we must make sure supply chains keep a vigilant watch to make sure we do not exacerbate the crisis. For thirty years we have known the causes and remedies of bullwhip effects. Bullwhip effects are caused by very human albeit ‘irrational behaviors’. For example, hoarding when there is no actual shortage of specific products. It is too tempting to think that one would ‘rather stock up because you never know’ and ‘hey everyone else is buying toilet paper, that might be an issue down the line, let me do it as well’. This is all understandable but will only make the situation worse. “Speculators make their own expectations come true”. If everyone thinks there is going to be a shortage of toilet paper, then there will be one.

The only way to arm ourselves against a shortage is to constantly communicate the real situation and to show that what we are saying is also true as quickly as possible. As, for example, ECB President Draghi did when he managed to save the euro by saying; “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough” and then proceeded to start a spectacular buying program.

Bullwhip Effect- Chain Collaboration

The second reason for the bullwhip effect is that each party makes individual decisions in its own interest, causing the chain as a whole to derail; “everyone is doing their best, but together we will make a mess". The solution is as simple as it is difficult to implement: we need more and better chain collaboration. The benefits of increased and improved logistics cooperation at conferences, courses and other gatherings have long been recognized. However, we still seem unable to take any actual steps towards action. The current situation is not ‘business as usual’. Now is the ideal time to flip that switch. Change usually requires a crisis so let's use it to our advantage.

Connected

The coronavirus can spread so quickly throughout the world because globalization has made the world highly connected. It is clear that borders can no longer be closed. Our main and most important tool at the moment is ‘social distancing’. Fortunately, more than ever there is a connection option that does not require personal contact; the internet-related information systems that serve us. This means that supply chains can still communicate effectively and efficiently without directly exacerbating the pandemic. Communication is absolutely essential to make supply chains agile in these uncertain times. It is important that we now have the will and the courage to trust one another and continue to share that information fully.

Logistics as a Troubleshooter

It cannot be the case that when the toilet paper runs out, it is said that "there is enough toilet paper but the logistics are slow and we have to wait for that". If the going gets tough, the tough get going; as the logistics and supply chain community, we can take on an important role and overcome bottlenecks. There will undoubtedly be sectors which experience a big uptick in demand (supermarkets, hygiene products, medicine) and other sectors which will come to a standstill (catering, retail). Together we have more than enough capacity. It is now time for horizontal cooperation; let's help each other and thus contribute as the logistics sector does.