As the third year of the COVID-19 pandemic is underway, businesses are still navigating a changing economic landscape and readjusting expectations for almost every facet of their supply chains, from supplier availability to last-mile delivery. One method of managing major supply chain disruptions has been operational repurposing – the most notable example of which was when distillers across the U.S. shifted production from whiskey and vodka to hand sanitizer to meet soaring consumer demand. But as the pandemic continued to interrupt regular operating procedures, other businesses pivoted (or attempted to pivot) as well: clothing brands and fashion designers made masks; car manufacturers aimed to produce respirators and ventilators; and airlines began putting cargo shipments into empty passenger seats.
Such drastic shifts in business operations are no small feat, and not all firms are able to repurpose, making supply chain plasticity – or the ability to make major changes to supply chains within a short window of time to accommodate significant shifts in the overall business environment – crucial to disruption management. Both supply chain networks and CEO networks play vital roles in repurposing operations, and JBL authors Ellie C. Falcone of the University of Oklahoma, Brian S. Fugate and David D. Dobrzykowski of the University of Arkansas investigate in “Supply chain plasticity during a global disruption: Effects of CEO and supply chain networks on operational repurposing.”
Operational repurposing, or when a firm undertakes material, production, and/or operations changes to produce critical resources during an unprecedented disruption, can be viewed as a reflection of a company’s supply chain plasticity. The process can be costly, risky, and time consuming, as it alters existing operations systems and takes time to establish relationships with new suppliers to meet new customer demands. It’s also highly speculative: some businesses that pivoted to meet new demand ended up oversupplying the market and realizing a lack of long-term buyers.
But whether or not a firm will repurpose its operations is also impacted by their position within the supply network and their CEO’s management network. Companies that hold prominent positions within supply chain networks tend to have access to information and resources that other less prominent companies don’t. But a more prominent position also comes with limitations: these companies rely more on, and are under more constraints from, external stakeholders through contractual and informal relationships.
CEO networks matter too: those who are well-connected to other well-connected people in social networks – something that’s been linked to a company's overall strategy and performance – could provide valuable information and resources that would enable operational repurposing. But a CEO holding a more entrepreneurial position within the management network might be more innovative, as opinions tend to be more diverse across unconnected groups.
Overall, if a firm occupies a more entrepreneurial position in both their supply chain and CEO networks, their likelihood of repurposing company operations goes up. But holding prominent positions in both supply and CEO networks has the opposite effect: the likelihood of engaging in operational repurposing decreases. That said, both entrepreneurial and prominent network positioned CEOs were found to enhance the positive relationship between entrepreneurial supply network positions and the probability of operational repurposing.
For managers, this can broaden an understanding of operational repurposing – while the COVID-19 pandemic is a particularly disruptive and unprecedented event, firms with entrepreneurial characteristics within supply and CEO networks were able to react quite quickly. It also reveals the enormous impact that both supply and CEO networks have on operations, which boards of directors and other managers should be aware of and actively manage.
Policymakers should also take note, as governments everywhere look to mitigate future catastrophes and navigate our current one. Proposed policy solutions to navigating potential supply disruptions should perhaps have firms consider designing for supply chain plasticity in addition to, or instead of, stockpiling inventory. Coordination between government and private industry in times of crisis might also encourage operational repurposing – public agencies might identify key firms within networks as first testers or adopters of new policies. Governments might also identify firms with entrepreneurial positions to form public-private collaborative partnerships, as well as consider lessening red-tape procedures that might be hurdles to firms engaging in operational repurposing in times of incredible crisis.
