Podcast: Supply Chains, and Why They Break

FAU's David Menachof and Paul Owers discuss supply chains and the pandemic's effect on them, plus a new master of science in Supply Chain Management offered by the college.

"The original problem was the shift in supply and demand occurred simultaneously. And on a global scale, it was just unprecedented."
~ David Menachof

Episode Transcript

Paul Owers (00:12):

Hi, I'm Paul Owers, the media relations director for the Florida Atlantic university college of business. Today, I'm speaking with David Menachof, an associate professor in the information technology and operations management department. The program conducts innovative research, works with the local business community and helps graduates bridge the two most important areas in a corporation business and technology. Our discussion focuses on supply chains and a new master of science in supply chain management at FAU. For more information on the information technology and operations management program, visit business.fau.edu/ITOM. That's business.fau.edu/ITOM. Thank you.

Paul Owers (01:03):

David, thanks for joining us. Can you explain what a supply chain is and what a healthy one looks like?

David Menachof (01:10):

Well supply chain starts with the raw materials and that can be grain oil nowadays, lithium you move it to a production and processing place, which can happen several times over because parts are made into components. Components are put into other parts, and eventually it may end up in a consumer product or automobile as an example, but basically it involves all the companies in between that raw material and the end consumer. And in addition to the supplier and end consumer, you've got three PLS or third-party logistics providers, which provide the transportation and warehousing in between you also asked about what does a healthy supply chain look like? Well, first of all, no two supply chains are the same, but the focus of all of the healthy, the best supply chains out there have an orientation that has supply chain as the key focus of the company to develop and innovate and adopt the latest technologies. Basically these are the companies that end up as the best in class in their regions, and they all have responsive, resilient, efficient, affordable, and effective operations to provide the delivery to that end customer.

Paul Owers (02:44):

Now, because of COVID, what kinds of problems surface with supply chains and which of them continue to be an issue?

David Menachof (02:50):

The original problem was the shift in supply and demand occurred simultaneously. And on a global scale, it was just unprecedented. And I've kind of described this as a black swan in a perfect storm. We have a bullwhip effect exaggerated by the whole world experiencing the same thing at pretty much the same time. If it was more of a localized event like the hurricane that we get down here in south Florida, you can recover from that because other parts of the country and the world have supply that can be shifted, but there was just no spare supply around the globe. And so, initially we had the PPE, the toilet paper and hand sanitizer shortages. Now all of those are plentiful available and I've even seen now masks are going on discount because there are too many of them. And with the mask requirements dropping out less people are going to buy those.

David Menachof (04:00):

Another thing was webcams were actually hard to find as people move to remote working, they all demanded additional webcams and they were actually hard to get for quite a while the other side of demand is then this drop in supply. They basically couldn't make enough of the right products that were being demanded initially. And we're starting to see ideas like the, you know, build a paper plant to bring up the toilet paper, but you can't build those overnight. And so we're stuck with a limited capacity for all of these products on the supply side, additionally, on a more current basis we've got container ships right, can't keep up with the demand. The ships can't get into ports. Once they do get into the port, there aren't enough trucks and trains to get the containers to their destination. So we're having just this incredible demand.

David Menachof (05:09):

And again, our infrastructure just cannot handle it. We expect to see shortages popping up for the next year or even longer until this demand settles back to quote a more normal volume. The ship that was stuck in the Suez Canal didn't help as well. That had several hundred ships bringing cargo mainly between Europe and the far east, but some of that still has a knock on effect to the trans Pacific trade. Because those, some of those ships then move over to, to serve our country serve the west coast. And so at the moment one of the big products that is in short supply is semiconductors. There is so much demand and when these companies are making chips for one product, it means they can't make it for another one. And one of the big ones is the problem with cars.

David Menachof (06:13):

A lot of car manufacturers have vehicles that they cannot sell at this moment because they're incomplete. Some have shut down assembly lines, other have basically completed the car, but parked it until they can get these chips and be able to actually sell the final vehicle. And that then has a knock on effect into the rental cars because the rental car companies all divested of a lot of their vehicles at the beginning of COVID and now that people are coming back, the demand again is just outweighed their supply. And we saw something like several hundred dollars a day for just a compact car. And out in Hawaii, they were renting you haul trucks because those were cheaper than actually renting a car from one of the, the normal rental companies coming up. I've heard over reading about tires, car tires they're rubber shortages. Some of the fast food chains are having to limit those little individual ketchup packs because there are not enough the plastics to make those are in short supply at the moment and soft drinks as well because they, if you look on the shelves in many of the stores, they're not full because there are shortages of the plastics from the petroleum industry in order to make those bottles,

Paul Owers (07:53):

FAU is offering a new master of science in supply chain management. Can you tell us a bit more about the program?

David Menachof (08:00):

Definitely. We're proud to be offering this new degree. It's designed to arm graduates with the key skills and hands-on experience that are demanded by employers today. We've got a solid focus on supply chain management and including international shipping and trade. And we add business analytics using AI and machine learning. We came to this conclusion after talking to folks in industry and saying, is this what do you need? And this is what firms are looking for to have new recruitment into the, the industry. So we're gonna work on that. It's a series of 10 courses. The program can be completed in as little as 18 months. We do this focusing on let's say, real world and application as we go through. So for people trying to find us just search for FAU, masters in supply chain and all the details are there. And we're still accepting applications for fall 2021 this year.

Paul Owers (09:13):

Terrific. Thank you very much for joining us today, David.