Exceptional Release Presents
COVID-19: An Unwelcome Introduction to Supply Chain Security
By Major Vincent McLean, USAF
While most people may not be familiar with the term ‘Supply Chain Security,’ the Novel Coronavirus 2019 (COVID-19) has provided a harsh introduction to its increasing importance. Governments and businesses have begun taking practical steps to slow the spread of the virus, ease the burden on the public, and support the medical community; however, there are still significant challenges. As COVID-19 continues to spread across the globe, with many businesses and economies shut down, critical supply chains have had to remain operational, posing unique challenges but also providing an opportunity to learn. In an era of power competition where threats to logistics and supply chains are real and the impacts enormous, these lessons learned need to be considered and implemented in order to safeguard the lethality of the Department of Defense (DoD) and bolster the National Defense Strategy.
On December 31, 2019, a pneumonia of unknown cause in Wuhan, China was reported to the World Health Organization Country Office. On April 15, 2020, 106 days later, over 2 million cases of COVID-19 were confirmed with over 129,000 deaths.[i] The world may never know the exact number of cases and deaths as many were unreported. After pandemic declarations and billions of dollars spent, the world is still struggling to contain the virus and recover from the damage.
Beyond the human life costs–economists, traders, and governmental leaders are working to understand the extent of damage COVID-19 will do to economies, in light of near-total shut down during the pandemic. Eight of the ten worst stock market days ever, happened during COVID-19.[ii] Multiple intergovernmental agencies and forums are projecting losses that could extend into the trillions of dollars.[iii] Few aspects of life have not been drastically impacted by COVID-19. Millions of people have become unemployed leading to massive impacts socially and economically; however, through all of this turmoil, supply chains keep operating.
SUPPLY CHAIN SECURITY
Supply chain management is defined as the management of goods from the point of origin to consumption. The process of taking wheat from a farm, all the way to the loaf of bread going into a shopping basket is an example of a supply chain. Security, in this regard, is the part of supply chain management that focuses on protecting those goods and processes from disruption[iv] and increases resiliency.
The potential impacts of failed supply chain security are so critical that in 2012 the Obama Administration published a national strategy for global supply chain security in an attempt to spur action and unify efforts to tackle the problem.[v] While the impact of this strategy is uncertain at best, its intent was to protect government and business interests from a wide range of risks ranging from natural or man-made threats. Disasters such as typhoons, tsunamis and earthquakes cost companies billions of dollars but man-made issues such as labor strikes and terrorism can damage business just as easily.
The potential impacts of failed supply chain security are so critical that in 2012 the Obama Administration published a national strategy for global supply chain security in an attempt to spur action and unify efforts to tackle the problem
Global terrorism against supply chains is a massive issue. In 2017 Maersk, the world’s largest shipping company with a fleet of over 600 container vessels was struck with a ransomware virus that crippled the company for two weeks. In a stroke of luck Maersk was able to restore its operations fairly quickly; however, the attack still cost the company $250-$300 million.[vi]
Additionally, human resource issues can threaten supply chains. In 2015, 14,000 longshoremen working at 29 ports on the West Coast went on strike. Those 29 ports move about $1 trillion worth of goods annually. It’s estimated that the strike, that went on for over a week, cost the economy about $2 billion a day.[vii]
Similarly, nature causes supply chain disruptions, with the potential to stymie corporations and entire economies. The automotive industry in Japan was crippled following the tsunami in 2011, and companies like Subaru were forced to suspend production at certain plants, hurting local economies and strangling shipments for a considerable time.
COVID-19 AND SUPPLY CHAIN DISRUPTIONS
Impacts of COVID-19 have been seen across almost all supply chains. Military combat readiness has been impacted, disruptions and production line stoppages have occurred at manufacturing facilities, slow-downs in communication and transportation, as well as bare shelves at grocery stores all have made headline stories. Due to the broad, interconnected nature of global supply chains, at every step the possibility for exposure to COVID-19 exists. These impacts to the supply chain are wide-ranging and have a huge impact on governments, militaries, businesses and individuals alike.
Nationwide, the medical community is desperately short on medical supplies to treat critical patients afflicted by COVID-19. In some cases, ventilators are needed in order to sustain breathing for infected individuals facing breathing difficulties. It is estimated that across the world an additional 880,000 ventilators will be needed, 75,000 of those in the United States.[viii] Current manufacturers are unable to meet this demand. In a World War II-like move, the Food and Drug Administration (FDA) has approved Ford, General Motors and Tesla to manufacture the needed ventilators. This surge in manufacturing highlights shortages in standard manufacturing capacity and lack of extra supplies to meet increased demand.
Impacts on military readiness can already be felt. For the DoD, it has directly impacted readiness, budget, and the ability to execute the National Defense Strategy. The public firing of the Captain of the USS Theodore Roosevelt, a US Navy aircraft carrier, following a letter pleading for senior leaders to move faster to help his infected crew, highlights the impacts felt by shortages in medical supplies and their effects on DoD readiness. After introduction to the crew, the virus spread rapidly and virtually the entire crew of the carrier was placed into quarantine. The slowed response to the needs of the USS Roosevelt highlight a supply chain that is unable to meet the demand. This inability of medical suppliers and professionals to meet the needs of the sailors has directly impacted DoD readiness and the public perception of the US military.
Long term impacts to military readiness from COVID-19 are also starting to present themselves. The manufacture of the F-35 Lightning II has been delayed and Lockheed Martin is projecting to deliver fewer aircraft than expected in 2020. This disruption, directly attributed to their supply chains, could cost the company up to $375M. Lockheed Martin’s suppliers were unable to deliver due to COVID-19 complications, and F-35 manufacturing lines were impacted.[ix] Disruptions such as these may have long term implications on military readiness as fewer aircraft enter service and delays in delivery could impact the Air Force’s and Navy’s ability to project power.
On the business side, public and commercial transportation has either been canceled or severely reduced, thus making it difficult for essential workers to get to their jobs. Most subway and metro services have been cut back and bus lines operating on limited schedules. Commercial airlines are struggling to continue operations with reduced ridership, while the responsibility to protect the safety of crews and passengers grows. Airlines are accomplishing this by issuing aircrews masks and gloves and have reduced in-flight services. Additionally, the International Air Transportation Association has advised airlines to begin testing travelers for illness before allowing them to fly.[x] Anyone who has flown in the cramped economy section of commercial travel remembers just how many people were pressed within 6 feet of them, so continuing operations as normal is not an option. Airline carriers have taken drastic steps in order to continue to operate, yet struggle to remain fiscally solvent.
Critical hallmark stores such as grocers struggle to maintain stock on shelves while balancing strategies to continue point of sale operations and concurrently reducing risk to employees and consumers. Panic buying of supplies causes stock outages, which forces companies to limit item purchase amounts. Stock outages not only reduce sales, but limiting how much of a specific item can be bought puts the onus of control on the business rather than the individual or community. Additionally, new methods of sale include minimizing touchpoints between customers, employees, and the items they carry in order to reduce risk of exposure. These methods help to increase safety, but further slow sales and throughput while adding costs.
Companies that focus on inventory and home delivery such as Amazon should be thriving, and while their stock prices have significantly risen, time has shown that they are struggling to keep up with the surged demand. Unlike planned surges such as the holiday season, COVID-19 came without much notice. Manufacturing and distribution infrastructure didn’t have enough time to ramp up production, increase supplies, and add temporary workers to help with the additional workload. Furthermore, COVID-19 represents a real threat to those warehouse workers. Workers at more than 50 warehouses (of the over 500 facilities operated by Amazon) have tested positive for COVID-19.[xi]
While the CDC says that the risk of contracting COVID-19 through receipt of a package is low, it is possible. Studies have found that the virus can survive for up to 24 hours on cardboard and 2-3 days on plastic.[xii] Additionally, it takes an infected person 2-14 days to begin showing symptoms[xiii], if they show symptoms at all. It is currently believed that anywhere from 17% to 25% of carriers don’t know they have COVID-19[xiv]. The potential to spread infections despite no symptoms forces preventative steps to be taken, even if no evidence of infection is present.
The possibility exists that the critical supply chains that are delivering goods, and medical supplies could be one of the vectors of the virus. The warehouse worker could be infecting the delivery driver, who carries the virus out into the world. While businesses and governments continue to work against these challenges and secure the supply chains, there are already lessons that can be learned. The need to be able to execute the National Defense Strategy in great power competition despite challenges to the supply chains grows more critical.
LESSONS LEARNED AND HOW TO IMPLEMENT
The National Defense Strategy specifically calls for modernizing of key capabilities and outlines the need for “Resilient and Agile Logistics”[xv]. This need calls for logistics to be able to sustain under persistent multi-domain attack. While COVID-19 represents a threat that few could have predicted, the lessons learned and our experiences will help ensure the safety and security of both civilian and DoD personnel in the future.
As the size and scope of the COVID-19 pandemic became better understood, steps (and missteps) were made, in order to protect personnel, equipment, systems, and community, from infection and disruption. While these counter-measure tactics may be specific to countering COVID-19, the principle methods and philosophy of their defense remain sound. It is through these methods that we must understand the results in order to apply best practices, to future threats.
Future challenges may be outside the biological domain. Computer viruses such as those that attacked Maersk threaten governments and businesses daily. Insider threats like those of spies or saboteurs can delay and disrupt production and distribution ensuring that products do not arrive at their destination. Counterfeit products can be as innocuous as purchasing a cheap knockoff, or they could be maliciously placed by a foreign competitor to damage equipment or give the competitor a subtle advantage. Counterfeit service providers could gain access to systems in order to read product information, gain intelligence[xvi], or launch attacks.
In an era of great power competition, disruption of supply chains can have an enormous effect on the nation’s ability to project power.
These threats have the potential to delay, disrupt, or even destroy supply chain performance and capabilities. In an era of great power competition, disruption of supply chains can have an enormous effect on the nation’s ability to project power. Learning from COVID-19 teaches us some fundamental lessons for future mitigation:
- Early identification and resolution – In 106 days, COVID-19 spread to over 2 million people and caused over 129,000 deaths. Early identification and accurate evaluation of threats, whether they are natural or manmade, followed by quick action is crucial. Governments and businesses cannot afford to react to everything; however, failing to react appropriately after identification can be fatal. Dire to any security strategy is early identification and evaluation. Further, timely resolution of the problem will reduce the total resources required before it becomes a global pandemic. Early identification of computer viruses, counterfeit products, or illegitimate venders help secure the supply chain promptly.
- Unified Effort – We must also learn from mistakes. One fault is that as individual states within the United States declared an emergency, cooperation gave way to competition for limited resources. Without a strong guiding hand to equitably balance needs, states began campaigns to secure limited resources for themselves. In order to avoid this within the military, the DoD needs a “Joint Logistics Enterprise Integrator” with the authority to strategically engage government, military and businesses. This integrator would, in turn, equitably balance limited resources between branches, Combatant Commands, other governmental bodies, and international partners. While the Chairman of the Joint Chiefs of Staff is the Global Integrator, the DoD needs a “Logistics Integrator” in the form of a functional Combatant Command. Combining the Defense Logistics Agency and TRANSCOM and designating the TRANSCOM Commander as the Defense Logistics Integrator would provide that unity of effort to ensure cooperation, rather than competition.
- Better infrastructure security – Steps being taken by transportation companies and grocery stores to isolate and reduce the risk to employees give the next method of increasing supply chain security. High-risk yet critical positions have been identified and businesses activated systems and processes. Identification of critical infrastructure and systems where we can increase security to those key nodes will help to maintain the resiliency of the supply chain. Logistics command and control, drivers, pilots, and information systems, are all critical parts of supply chain infrastructure and all are at risk of compromise unless additional steps are taken.
- Layered/Redundant Defenses – In order to protect a supply chain from deep intrusion and corruption, we must take our next lessons from the mistakes of Amazon, the USS Roosevelt, and Maersk. Deep intrusion into the USS Roosevelt and Maersk’s systems effectively shut them down. In order to defend against similar situations, layered and redundant processes and systems are needed. Maersk was saved by a stroke of luck when one of their systems in Africa happened to be offline when the virus struck. The redundant offline system was able to back up the entire enterprise. The USS Roosevelt didn’t have any layered or redundant defenses to COVID-19 and the entire ship’s crew was put on quarantine. In the case of Amazon, every step of the supply chain process can spread the infection, potentially taking the infection deeper into the system. In order to combat this, additional protection measures should be employed at each step with redundant backups. The stroke of luck that saved Maersk gives us one example of how to model these defenses. Every step that has the potential to compromise the supply chain should have steps to rapidly identify, sanitize, and counter disruptions immediately starting with redundant back-ups processes.
- Invest in Risk Management – Stock outages at grocery stores and lack of ventilators to treat infected patients are indication of a surge in demand without the supplies or manufacturing capacity to meet that demand. This is a risk management problem. Having excess supplies or excess capacity is extremely costly when not needed; however, in cases like ventilators, lacking them can lead to a greater death rate. This is something the DoD should watch closely. If the Pentagon wants to protect itself from shortages such as these, not just in medical but in other supply chains too, it needs to continue to invest in new production methods, increase war reserve materials and other long-lead time/slow production items like aircraft parts. Current spending to combat COVID-19 will inevitably have to be paid for in reduced budgets; however, as a DoD and a nation, if we want to preserve lethality, we cannot afford to withhold risk management and sustainment spending.
Supply chain disruptions happen; however, COVID-19 has given the DoD and the world direct insights into the challenges of supply chain security. These challenges not only threaten people and systems, but they risk the nation’s security and the DoD’s ability to execute the National Defense Strategy. In an era of great power competition, and the need for logistics that can sustain under persistent multi-domain attacks, the DoD needs to take a hard look at the lessons from COVID-19 and apply them to improve supply chains’ security.
Without effective supply chains, businesses, governments, societies, and military operations fail. If the supply chain does not work, wheat from the field never becomes bread in a basket. Without spare parts, fuel ships, planes and tanks stand still. Without food or water, people cannot work. Without bullets and bombs, the DoD cannot fight. Without medical supplies, doctors and nurses cannot save lives. Without secure supply chains, the world stops.
These five lessons: the need for early identification and resolution, unified effort, better infrastructure security, layered and redundant defenses, and investments in risk management will increase supply chain security and better prepare the DoD and the nation to counter present and future threats to logistics and supply chains.
About the Author:
Maj McLean is a career Logistics Readiness Officer currently assigned to the Defense Logistics Agency with an upcoming assignment to attend the Advanced Study of Air Mobility (ASAM) Course. He was commissioned through Texas Tech University in 2008 and has a Masters of Science in Supply Chain Management from Syracuse University. Prior to this assignment, he was the Executive Officer of the 635th Supply Chain Operations Wing and has served as a Squadron Director of Operations, Flight Commander, Installation Deployment Officer, African Air Advisor, and Combat Advisor.
[i] Johns Hopkins University of Medicine. (2020, April 15). COVID-19 Map. Retrieved from Coronavirus Resource Center: https://coronavirus.jhu.edu/map.html
[ii] Amadeo, K. (2020, March 17). How Does the 2020 Stock Market Crash Compare WIth Others? Retrieved from The Balance: https://www.thebalance.com/fundamentals-of-the-2020-market-crash-4799950
[iii] Makridis, C., & Hartley, J. (2020, April 6). The Cost of COVID-19: A Rough Estimate of the 2020 US GDP Impact. Retrieved from Mercatus Center: https://www.mercatus.org/publications/covid-19-policy-brief-series/cost-covid-19-rough-estimate-2020-us-gdp-impact
[iv] Rouse, M., & Lewis, S. (2017). Supply Chain Security. Retrieved from SearchEPR: https://searcherp.techtarget.com/definition/supply-chain-security
[v] Obama, B. (2012, January). National Strategy for Global Supply Chain Security. Retrieved from Obama White House Archives: https://obamawhitehouse.archives.gov/sites/default/files/national_strategy_for_global_supply_chain_security.pdf
[vi] Leovy, J. (2017, April 17). Cyberattack cost Maersk as much as $300 million and disrupted operations for two weeks. Retrieved from Los Angeles Times: https://www.latimes.com/business/la-fi-maersk-cyberattack-20170817-story.html
[vii] Pinsker, J. (2015, February 24). How 14,000 Workers Managed to Slow Down the Entire Economy. Retrieved from The Atlantic: https://www.theatlantic.com/business/archive/2015/02/how-only-14000-workers-briefly-slowed-down-the-entire-economy/385858/
[viii] Parker, T. (2020, March 25). 880,000 more ventilators needed to cope with coronavirus outbreak, says analyst. Retrieved from NS Medical Devices: https://www.nsmedicaldevices.com/analysis/coronavirus-ventilators-global-demand/
[ix] Weisgerber, M. (2020, April 21). Lockheed Martin Expects Coronavirus to Delay F-35 Deliveries. Retrieved from Defense One: https://www.defenseone.com/business/2020/04/lockheed-martin-expects-coronavirus-delay-f-35-deliveries/164778/
[x] Asaf, S. (2020, March 2). Coronavirus: What are airlines doing to protect travellers? Retrieved from Business Traveller: https://www.businesstraveller.com/business-travel/2020/03/02/coronavirus-what-are-airlines-doing-to-protect-travellers/
[xi] Weise, K., & Conger, K. (2020, April 5). Gaps in Amazon’s Response as Virus Spreads to More Than 50 Warehouses. Retrieved from New York Times: https://www.nytimes.com/2020/04/05/technology/coronavirus-amazon-workers.html
[xii] National Institutes of Health. (2020, March 17). New coronavirus stable for hours on surfaces. Retrieved from National Institutes of Health: https://www.nih.gov/news-events/news-releases/new-coronavirus-stable-hours-surfaces
[xiii] Center for Disease Control and Prevention. (2020). Coronavirus Disease 2019. Retrieved from Center for Disease Control and Prevention: https://www.cdc.gov/coronavirus/2019-ncov/symptoms-testing/symptoms.html
[xiv] Lee, B. Y. (2020, March 18). Study: 17.9% of People With COVID-19 Coronavirus Had No Symptoms. Retrieved from Forbes: https://www.forbes.com/sites/brucelee/2020/03/18/what-percentage-have-covid-19-coronavirus-but-do-not-know-it/#53a5db5e7e90
[xv] Office of the Secretary of Defense. (2018). Summary of the 2018 National Defense Strategy. Retrieved from Department of Defense: https://dod.defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf
[xvi] Wilshusen, G. C. (2018). Supply Chain Risk Affecting Federal Agencies. United States Government Accountability Office.
Featured photo courtesty of How COVID-19 Can Restructure Supply Chains Forever, by Machine Design Staff, https://www.machinedesign.com/3d-printing-cad/article/21129695/how-covid19-can-restructure-supply-chains-forever
Thank you to our sponsors