26 ISE Magazine | www.iise.org/ISEmagazine

We grew up hearing about the Great Depres-

sion from our parents and grandparents. Like

the Great Depression was for their time, the

COVID-19 pandemic will be for our gen-

eration – the story we tell our children and

grandchildren.

The COVID-19 pandemic created impacts not seen in our

lifetime. From a record number of unemployment claims to

a sharp decrease in GDP and performance issues due to in-

creased demand, this is the most dynamic, uncertain time

we have ever witnessed. Government restrictions, including

a stay-at-home order and the closing of all nonessential busi-

nesses, ampliﬁed a volatile situation by straining commerce

and the global economy.

While issuing these orders effectively closed the economy,

simply lifting the restraints does not automatically reopen the

economy or return business to “normal.” In my playbook,

“Restarting the Economy: Guidance for Public and Private

Leaders,” (link.iise.org/restarting-the-economy) I explain the

huge difference between restarting the economy and relax-

ing government restrictions. To successfully restart the econ-

omy, companies must ﬁrst be reopened, and each plan will be

unique. Similarly, restarting companies requires more than

just reopening store doors; the supply chain infrastructure

needs to be in place for companies to be able to restart busi-

ness operations.

Synchronizing supply and demand

Twenty-ﬁve years ago, the supply of goods to the consum-

er was in the hands of supply professionals. Retail planners

worked with manufacturers to decide how much of what

items they would sell to consumers. However, as each year

passed, the control of the ﬂow of goods moved from the sup-

ply side to the consumer, or demand, side. Today’s sophis-

ticated sales and operations planning (S&OP) processes at-

tempt to forecast the demands of consumers and satisfy this

demand by producing the right items in the right quantities

at the right time.

For some products, like the amount of tomato soup con-

sumers desire, S&OP works well; for other product catego-

ries, such as women’s fashion, it does not. But in January

2020, the whole game changed and even the best S&OP pro-

Restarting companies

and the economy

How to overcome supply chain challenges,

disruptions in a VUCA world

By Jim Tompkins

July 2020 | ISE Magazine 27

cesses in the world were woefully inadequate to synchronize

supply to demand.

The U.S. economy was booming in early 2020. As the

Chinese population migrated to their hometowns for the an-

nual Lunar New Year celebration, there were early reports of

a virus that was very infectious and resulting in fatalities. As

the virus spread, people were isolated and could not return

to their workplaces. The Chinese economy was brought to

its knees and the virus spread to other countries. China is

often referred to as “the factory of the world” as it produces

a signiﬁcant portion of the materials used to manufacture

products, as well as a signiﬁcant portion of ﬁnished goods.

Chinese manufacturers supply materials for manufacturers

around the world.

The ﬂow of materials and ﬁnished goods around the

world is transported via the supply chain. The materials were

planned and bought from China but not made there because

factories were closed. Planning was done by forecasting de-

mand, then buying the materials needed. In fact, one of the

key objectives of supply chain management is to synchronize

the supply and demand of products as they ﬂow around the

world to minimize cost and drive proﬁtable growth.

The virus in China had a major impact on the supply of

materials around the world as demands could not be ﬁlled,

resulting in product shortages. The reopening of the Chi-

nese economy was unpredictable due to a ripple effect that

encountered the following set of “problem/go/problem/go”

as follows:

• The factory did not have workers.

• Workers came back to work.

• The factory did not have required materials.

• Workers came back to the materials’ suppliers.

• Truck drivers to deliver materials from manufacturers to

the factories were not available.

• Truck drivers came back to work.

• The factories started manufacturing.

• Truck drivers to deliver products from the factories to the

port were not available.

• Truck drivers to the port came back to work.

• The ports did not have workers to unload trucks and load

ships.

• Port workers came back to work.

• Ships sailed to their destinations with critical supplies of

both materials and ﬁnished goods to provide the much-

needed supply.

The disruption of the ripple effect as the virus spread

through China was huge. Demand for products went un-

ﬁlled. But just as the supply to Western countries was re-

stored, the virus arrived there. It did not arrive aboard the

ships of products but instead aboard airplanes carrying in-

fected passengers. As COVID-19 spread across North Amer-

ica and Europe, stay-at-home orders had a major impact on

demand for products. For discretionary products, demand

disappeared; for health-related products, demand doubled,

tripled and more. For some products, the demand shifted.

At the end of the ﬁrst quarter of 2020, there was so much

uncertainty that there was no synchronization of supply to

demand, resulting in inventory overages of discretionary

products and shortages of essential products. There were ap-

parel stores full of inventory that were closed for business and

grocery stores that remained open with near-empty shelves.

At that point, COVID-19 had created tremendous uncer-

tainty on the ﬂow of goods, which had major impacts on the

global economy.

Innovative and crisis disruptions at play

We live in an unprecedented time in the evolution of the

global economy and the supply chain that supports it. This is

the result of an unprecedented level of innovative disruptions

and crisis disruptions peaking at the same time. If only one

of these disruptions were peaking, the supply chains of the

28 ISE Magazine | www.iise.org/ISEmagazine

Restarting companies and the economy

world would be shattered. But in the spring of 2020, both

types of disruptions were peaking.

Innovative disruptions. The level of volatility we are

experiencing is driven by the rise of digitalization and the

frequency of change, also known as the “disruption cycle.”

The disruption cycle is turning nonstop, beginning with an

innovation that sometimes leads to entrepreneurship or, if

it’s too risky, winds up dead. Businesses that move on from

entrepreneurship will become disruptors, but some of those

will die, too.

However, those that harness innovation and boldness will

disrupt the status quo. They then move through the incuba-

tion and validation phases before becoming the new status

quo and, with the addition of professional management, be-

come an established ﬁrm. It is in this phase when those that

are too risk-averse or resistant to change will fail. Businesses

that live through this stage and move on to innovation, cou-

rageous leadership and new boldness will achieve proﬁtable

growth and value creation and become the new leader(s).

Innovative disruptions occur as companies pursue the dis-

ruption cycle (Figure 1). For the last three years, disruptions

via digital innovations have occurred at an ever-faster rate,

with today’s digital era producing the highest level of in-

novative disruption in history. This is partially due to the

increased speed at which companies travel around the dis-

ruption cycle. Thirty years ago, an organization did so once

a decade. Fifteen years ago, a loop around the cycle took ﬁve

years; today, the cycle is traversed once a year or faster.

Crisis disruptions. Crisis disruptions can result from a

variety of events. Here is a list of the top 15 of 2018, in order

of frequency of occurrence, that accounted for 90% of all

crisis disruptions.

1. Mergers and acquisitions

2. Factory ﬁre or explosion

3. Reorganization

4. Business sale or spinoff

5. Factory slowdown or disruption

6. Regulatory change or tariffs

7. Extreme weather

8. Hurricane, typhoon or cyclone

9. Earthquake

10. Labor strike

11. EMA, FDA or OSHA action

12. Fine or recall

13. Power outage or shortage

14. Labor action or settlement

15. Port disruption

Interestingly, in the top 30 – which account for 99.8% of

all 2018 crisis disruptions – the topic of human health or

pandemic is not mentioned. Additionally, at the end of 2019,

a panel of global trade experts presented the top 10 crisis dis-

ruptions they predicted would occur and mentioned nothing

related to human health or pandemic.

Another way to look at crisis disruptions is by measuring

their impact on the local, regional or global level and also

viewed by severity. A special category of crisis events that

have a huge global impact are referred to as “black swan”

events that have never happened before or are extremely rare

(highly improbable events); take people by surprise, as they

never imagined such an event occurring; carry a massive

transformational impact; and after its ﬁrst occurrence, the

event is rationalized in hindsight, as if it could have been

expected (even if it could not).

FIGURE 1

The disruption cycle

How innovative and crisis disruptions, and reactions to it, can affect the life cycle of a business. (Courtesy of Tompkins International)

July 2020 | ISE Magazine 29

Clearly, COVID-19 is a black swan event. The frequency

of black swan events has been increasing over the last three

decades, as evidenced by these events:

• 1990: Recession

• 2001: 9/11 terrorist attacks

• 2008: Mortgage crisis

• 2014: Ebola outbreak

• 2019: COVID-19 pandemic

Each of these black swan events had major impacts on the

economy and what was considered normal. In fact, all black

swan events result in creating the next normal.

How innovative and crisis disruptions

beget VUCA

As explained in my column (Page 22), the business world

has faced unprecedented levels of VUCA – volatility, uncer-

tainty, complexity and ambiguity. The concept of VUCA

was ﬁrst introduced by the U.S. Army War College in 1987

to describe the world following the Cold War. The term

can also be applied to the business environment, where the

combination of innovative disruptions spurring from to-

day’s increasingly digital world and crisis disruptions like the

COVID-19 pandemic have a tremendous impact on supply

chains and commerce, producing the highest level of VUCA

in histor y.

Let’s take a look at how VUCA impacts supply chains and

commerce today and what businesses can do to overcome

these challenges:

Volatility. Volatility is all about change – the nature of

change and frequency of change. The nature of change is

best illustrated by bugs. Take, for example, the ant: when

a baby ant grows into an adult, it gets bigger, but there is

no change, which is represented as continuous improvement.

Grasshoppers experience transformation through changes in

wings and reproductive organs. Lastly, the caterpillar under-

goes a total metamorphosis, or reinvention, as it becomes a

butterﬂy. The circle of life for companies requires comple-

tion of all three steps – continuous improvement, transfor-

mation and reinvention – to be successful in today’s digital

world.

In addition to the nature of change, we also have to look at

the frequency of change, also known as the “disruption cy-

cle.” As described earlier, the pursuit of the disruption cycle

is innovation and boldness that disrupt the status quo. Those

that successfully navigate all the way through the disruption

cycle and on to new innovation, courageous leadership and

new boldness will achieve proﬁtable growth and value cre-

ation. Then the cycle repeats.

Uncertainty. We live in the most uncertain times in

world history. This high level of uncertainty makes it impos-

sible for us to make accurate predictions or deﬁne standard

operating requirements. Instead of developing optimal solu-

tions, we need to focus on developing ﬂexible supply chain

solutions that are capable of adapting and constantly evolving

to offer a series of options. When fast-food chain Popeyes

failed to accurately predict the popularity of its chicken sand-

wich, it blew through its entire inventory of the new menu

item more than a month earlier than projected.

Optionality is the new optimality. Since you cannot pre-

dict what the future holds, make sure you have the greatest

number of options available so when uncertainty hits, you

can move to the option that will meet the requirements of

that day, or moment.

Complexity. The rise of digitalization and increased

complexity of commerce today requires companies to “sell

anywhere” and embrace a uniﬁed performance. While

there used to be a clear distinction between retailers, dis-

tributors, manufacturers and wholesalers, those lines are now

blurred, from grocery stores developing their own private

label brands to consumer packaged goods (CPG) companies

creating their own e-commerce sites and selling direct-to-

consumer (D2C).

To achieve success, companies must “ﬁsh where the ﬁsh

are” by selling anywhere their customers are. This includes

diversifying sales strategy to incorporate all the channels

and methods used by each of your customer demographics.

When developing a strategy, companies must think beyond

traditional digital and physical channels and evaluate all op-

tions, including mobile, desktop, social media, retail e-com-

merce, marketplaces, brick-and-mortar and more.

When broadening your sales strategy, it is important to

maintain a single, uniﬁed supply chain, which is where com-

plexity comes into play. This complexity drives the need to

unify our channels, logistics, marketing and technology to

act like a single company – or supply chain – and provide

customers with a seamless shopping experience.

Ambiguity. As we enter a new era of business, there is a

haziness of reality, or inability to understand what is really

going to happen, that takes place across all companies and

industries. Digital technology affects all businesses by paving

the way for new products, services and business models. In

this digital era, it is imperative for all organizations to vigor-

ously pursue digital commerce and prevail among the lack of

certainty. The COVID-19 pandemic has also fueled a rise in

ambiguity, as businesses and consumers alike are unsure what

the next normal will look like.

In addition to the digital imperative, we also battle the

speed imperative. The speed at which the marketplace

changes its mind is much faster than companies’ ability to

respond. With the speed imperative, it is not about how fast

you work; it is about the rate of acceleration. If it takes your

organization weeks to make a decision that should only take

30 ISE Magazine | www.iise.org/ISEmagazine

Restarting companies and the economy

days, you will fall behind and become a victim of the speed

imperative. Likewise, the half-life of a great idea is much

shorter than it used to be due to the speed of disruption. As

the pace of life accelerates, you need to act faster than ever.

The path forward: Restarting companies

Many factors impact the ability to restart business operations.

Like the economy, this cannot be done by simply ﬂipping a

switch. The COVID-19 pandemic separated companies by

industry sector into two different categories – the haves and

the have-nots. We look at the performance of these compa-

nies leading up to the crisis and separate them by those that

were strong or weak in December. The strength or weakness

of the business is based on the following factors (if you have

these below, you are strong; if not, you are weak):

• Financial stability: Strong P&L statement, balance

sheet, valuation, brand equity, cash ﬂow, liquidity, credit

availability, net proﬁt margin.

• Customer-centric: Great customer satisfaction, high re-

peat business, strong pipeline of new customers and lead-

ership understanding customers’ expectations.

• Planning: Robust and well-understood organization

plan, strategic plan, contingency plan, marketing plan,

customer acquisition plan, budget plan and succession

plan.

• Execution: Clear priorities and accountability, strong

metrics and feedback, responsiveness, discipline, maintain

deadlines, methodical and decisiveness.

• Unique value proposition: Pervasive across the com-

pany, a focus on applying core competencies to making

customers delighted and ambassadors.

• Energy: Passion for company success, high energy and

engagement, collaborative, inspiring, aggressive, optimis-

tic, a sense of urgency and an attitude of “getting it done.”

• Innovation: A spirit of openness and eagerness to get

better every day, to improve, to slay all sacred cows and

ﬁnd a digital path forward.

• Leadership: A high level of integrity and honesty, candid

open communications, perseverance, optimism, adapt-

ability and a good judge of people.

• Teamwork: A keen awareness of the tremendous value

and importance of true partnerships with customers, sup-

pliers and staff. Not one or two of these but all three.

• Culture: A progressive culture based upon organizational

alignment, respect, proﬁtable growth, intolerance for me-

diocrity, embracing diversity and having fun.

The industry sector has to do with how your industry

fared throughout the COVID-19 disruptions. Some indus-

tries were haves in that their industry did well and had ample

opportunity to prosper. To the contrary, the have-nots saw a

reduction in business and few opportunities to enhance suc-

cess. From a high level, here are the haves and have-nots

from COVID-19:

Given our prior performance ratings of weak and strong

businesses and being in a have or have-not industry sector,

we can see one of four paths for each business:

1. If you entered COVID-19 as a weak business and you are

in a have sector, you must pursue Doom to Boom.

2. If you entered COVID-19 as a strong business and you are

in a have sector, you must pursue Boom to Boom.

3. If you entered COVID-19 as a strong business and you are

in a have-not sector, you must pursue Boom to Hibernate.

4. If you entered COVID-19 as a weak business and you are

in a have-not sector, you must pursue Doom to Tomb.

To determine the strategy moving forward for each of

these paths, we must apply the philosophy of VUCA 2.0.

Developed by Bill George, a senior fellow at Harvard Busi-

ness School, VUCA 2.0 represents the top four leadership

traits vital for success in a VUCA world:

Vision. With the current level of uncertainty and com-

plexity, today’s business leaders must possess a clear vision

for their organization and be able to steer the company in

the right direction based on its deﬁned mission, values and

strategy.

Understanding. In order to successfully navigate the

business through unpredictable times, leaders must have a

thorough understanding of their organization’s capabilities

and strategies and engage directly with customers and em-

ployees to gain clarity and get a pulse on the changes occur-

ring in their markets.

Courage. Speed and decisiveness are crucial in times of

VUCA, so today’s business leaders must have the courage to

take risks and make bold decisions without hesitation or fear

of criticism.

HAVE HAVE-NOTS

Drug stores Airlines, airports & TSA screening

E-commerce & delivery Cruise lines

Janitorial services Engineering & consulting services

Grocery stores Events, conventions & trade shows

Pharmaceutical products Fitness centers, spas, hair & nail

salons

Security services Food & beverages for restaurants &

schools

Streaming services: Netﬂix,

Hulu, etc.

Hospitality, tourism & Airbnb

Walmart, Target & Costco In-store retail, malls & luxury goods

Wine & spirits Sporting goods

July 2020 | ISE Magazine 31

Adaptability. In today’s rapidly changing environment,

business leaders must be ﬂexible and able to quickly adapt

with a series of options to address whatever is happening at

the moment while still maintaining their strategic direction.

While the outcomes will vary and not all businesses will

prevail, the innovative disruptions of the digital era coupled

with the crisis disruptions from the COVID-19 pandemic

require total reinvention and an intolerance for mediocrity

to survive in today’s VUCA world.

With today’s unprecedented level of VUCA, it is impossi-

ble to predict what the future holds. COVID-19 has revealed

the weaknesses in traditional supply chain models, with the

introduction of the virus in China and the ripple effect it cre-

ated in supply chains and commerce that, like the virus itself,

spread across the world in the subsequent months.

The rise of digitalization and increased frequency of in-

novative and crisis disruptions require organizations to re-

think their supply chain strategies and focus on building

“anti-brittle” solutions. Instead of seeking ways to optimize

their supply chains, organizations need to “optionize” their

supply chains, deploying ﬂexible and agile solutions that are

capable of adapting and evolving to provide a series of op-

tions to address whatever is happening at any given moment.

Anti-brittle supply chains operate as a living system, enabling

organizations to reconﬁgure strategies, structures and solu-

tions quickly and efﬁciently to achieve success, proﬁtability

and growth in times of VUCA. 

James A. Tompkins, Ph.D., is founder and chairman of Tompkins

International and an international authority in digital commerce,

unichannel and supply chain reinvention. He is an IISE past presi-

dent and Fellow and received the Frank and Lillian Gilbreth In-

dustrial Engineering Award in 2015. He served as president of the

Materials Management Society and the College-Industry Council on

Material Handling Education and has been named a Distinguished

Engineering Alum by Purdue University and has also received more

than 50 additional awards for his service to his profession. He has

written or contributed to more than 30 books, been quoted in hun-

dreds of business and industry magazines and has spoken at thou-

sands of international engagements. Tompkins received his bachelor’s

degree in industrial engineering in 1969, his master’s in industrial

engineering in 1970 and his Ph.D. in 1972, all from Purdue Uni-

versity.

You can learn more about Jim Tompkins’ tips for managing

VUCA and the current COVID-19 crisis from these

sources:

• Webinars by the IISE Chapter 1 Performance

Excellence series: “Restarting the Economy:

Guidance on the Backside of the Disruption,” and

“Business Continuity Strategies and Tactics in Periods

of Major Disruption” with Tompkins and IISE President

David Poirier of The Poirier Group. Recordings and

downloadable PDFs are available at link.iise.org/

chap1webinar_archive.

• Tompkins’ white paper, “Restarting the Economy: Guidance for

Public and Private Leaders,” can be downloaded at link.iise.org/

restarting-the-economy or read at www.tompkinsinc.com.

• Tompkins is a scheduled keynote speaker Nov. 3 at the IISE

Annual Conference & Expo 2020, set for Oct. 31-Nov. 3 in

New Orleans. To register and ﬁnd a program schedule, visit

iise.org/Annual.

• A full list of resources, statements and more related to the

pandemic is available on the IISE Coronavirus Resource &

Response at link.iise.org/ covid_resource.

Webinars, white paper expand on topic