The Pandemic Has Raised Questions about the Global Supply Chain
The Pandemic Has Raised Questions about the Global Supply Chain
UCLA Anderson Professor Tang explains the pandemic’s effects in global supply chain
- Professor Chris Tang contributed his expertise to a supply chain panel alongside colleagues Professor Felipe Caro and UCLA Anderson Forecast economist Leila Bengali
- Since the pandemic began, Tang has been working with governments and corporations to find logistical solutions and with the press to inform the pubic
- Tang also authored an op-ed regarding why successful Asian Americans are penalized in the workforce
It is perhaps cliché to suggest that a topical expert “wrote the book.” But if the topic is supply chain management and the author is Distinguished Professor Christopher Tang, UCLA Anderson’s Edward W. Carter Chair in Business Administration, it’s a gold-standard cliché because Tang is the co-author of the essential text Managing Supply Chain Risk.
Since the pandemic began, the disruption of the global supply chain has become front page news, and Tang — who also serves as Anderson’s senior associate dean of global initiatives and faculty director of the Center for Global Management — has become a key voice in the conversation, as a consultant to governments and corporations looking for logistical solutions and as a source for reporters seeking to inform the public.
Tang’s public engagement is not at all limited to the specifics of his supply chain scholarship. For example, he authored an op-ed for the Los Angeles Times regarding why successful Asian Americans are penalized in the workplace. His personal goal is simple: to be of service to both the Anderson community and the community at large.
What that in mind, Tang — along with Professor Felipe Caro and UCLA Anderson Forecast economist Leila Bengali — participated in an Anderson town hall to shed light on the crisis within the global supply chain and to detail its effects on our daily lives.
In advance of the panel, we asked Professor Tang to answer a few of Google’s most-asked questions about the global supply chain.
The pandemic has created a platonic shift in consumer expenditure from service to durable goods because of stay-at-home measures. Consumers spent less on services (air travel, hotel stays, cinema, the gym, concerts, etc.) and spent more on durable goods (home office equipment, home repairs, home appliances, personal electronics). While the demand surged, the supply was hampered by factory shutdowns, port partial closures, labor shortages, etc. Consequently, it has created an imbalance between supply and demand in supply chains.
First of all, the biotech industry has been phenomenal. By leveraging mRNA technology that has never been used in humans until this year, Moderna and Pfizer-BioNtech have developed two very effective COVID-19 vaccines within one year — a new record in history. This new technology is the most important breakthrough that has shown to be effective to sustain supply chain operations during the pandemic. Clearly, online platforms have been instrumental in coordinating the vaccination programs in many countries. By controlling the virus spread, supply chain operations have been saved.
All companies involved in physical goods are affected. Shipping companies and logistics companies have reported record-breaking profit. Industrial real estate like warehouses are seeing huge rent increases of 10% over one year. This is the positive side. The negative impact is huge for small retailers who cannot get the right inventory to sell during the holiday season. Even if they can, they cannot compete with big stores on a scale to keep the cost down. Consequently, many of these small retailers may not survive. Car companies cannot produce enough cars because of semiconductor shortages.
In the midterm, the promised infrastructure spending by the federal government will help. But in the long term, we need a North American industrial plan that includes Canada and Mexico to identify regional sources of essentials and reduce our exposure to global turmoil. In the 1980s, we had 33 semiconductor companies with fabrication plants. Now, we have three major firms left. There is also a need for smarter technology, perhaps developed in partnership with universities that created the internet and semiconductors. Such efficiencies could generate higher wages to balance out steeper consumer prices. Unfortunately, I suspect that recent price hikes are here to stay.