Ben Hendricks, Central U.S. Operations Manager, AMECO
A singular adjective does not exist that can fully describe what has happened this year. It is like trying to describe a surrealist painting over the phone. Breaking down 2020 into coherent and digestible parts is akin to walking an alligator down the street with a leash. Doable? Probably. Recommended? Not exactly.
Analyzing 2020 and its generational aftermath is best left to academia. Unfortunately, business and industry leaders do not have a wait-and-see card they can play. Actions and reactions are ongoing, nonstop, and will ripple through balance sheets and income statements for years to come. What do we do when the experts are still trying to define what is wrong?
Thankfully, the consensus is already starting to coalesce for some decisions. Supply chain continuity was the first shockwave felt, as the bullwhip of lost production in China was heard (and felt) around the world, and then proceeded to cascade to all major manufacturing and distribution centers in every country. Reality removed the false guise of risk-free supply that had seduced the world into complacency. Despite what many seem to think, production shocks were never a black swan, but they were an under-mitigated risk by many companies. Companies that focused on supply chain diversity went from expensive to the only ones with inventory in a matter of days.
The question for firms today is "how to diversify?" Conventional wisdom on economies of scale suggests that diversification is inherently more expensive. However, there is a simple alternative: Maintain that economy of scale by utilizing suppliers that have diverse supply chains.
Of course, this is not a new idea; in fact, it is an incredibly old idea. The middle links in supply chains have often been seen as cost multipliers, but recent truth has revealed they are better categorized as "risk mitigators." The effects are compounded in critical but low-cost categories like PPE, water and fuel. The absence of any one of these can shut down a plant, project or factory, but the base cost is about 0.5 percent of the operational budget. Risking operations for a fraction of a percent of profit is foregoing safety in an attempt to chase a dollar bill tied to a fishing line that is constantly getting yanked down the road.
The good news is these critical sectors already have solutions in place. AMECO was born as an equipment company, but decades of experience and a dash of foresight have led the company down the path toward being a solutions provider for a multitude of industrial and construction problems. AMECO's ability to survive and thrive in disaster scenarios like COVID- 19 was evident as early as January. Even in those early stages, AMECO was called upon by clients to ship critical PPE to China, where much of it was manufactured, to support modularization and fabrication facilities working on modules destined for North America.
When March came and the "Charmin Dust Bowl" hit every store in the U.S., AMECO was providing toilet paper and critical safety supplies to clients for business use and distribution to their employees in a time of need. In April, AMECO assisted several hospitals and government agencies in developing plans for temporary housing and hospital space. In May, AMECO utilized its resources and found hand sanitizer through a company that provides rugs for the workplace. Not a typical or high-volume source, but an innovative source that allowed customers to continue operating while keeping their employees safe.
Perhaps most importantly, though, is the number zero. That is the net change in pre- and post-COVID-19 pricing of these services and items to AMECO customers. AMECO's breadth of suppliers allowed it to not only source items when they seemingly could not be found, but it also allowed AMECO to honor its pricing arrangements in a time of panic and rampant opportunism.
Someday, hopefully soon, COVID-19 will be resolved. Operations will normalize, and people will settle back into their old routines. In the meantime, it may be prudent to reconsider sourcing strategies and redefine risk profiles. That way, when the next unexpected economic event happens, you are not crawling down dark alleyways chasing a dollar that is always just out of your grasp.
For more information, visit www.ameco.com or call (864) 295-7800.
