Survival of the Smartest: Making Sure Your Link in the Supply Chain Beats the Virus

COVID-19 News and Updates | Thomas Torrillo | Mar 31, 2020

“When the second plane hit, we all went over to this big window in the office and looked out. In the distance, we could see the smoke from the burning towers just before they collapsed. A few years later, nearly all of us in that group still worked at the magazine, and one day, suddenly, all of the computer screens went blank and all the lights in the office shut down. And almost as one, we all got up from our desks and slowly made our way to that big window and stood looking out. No one spoke. But we were all thinking the same thing: Please. Not again.”

The good news, it turns out, is that what had happened that day was a black out, the kind New York City experiences occasionally. And, as horrific as it was, the good news for 9/11, if one can call it that, is that the loss of life occurred at just three locations in this nation. Those losses reverberated across the country, the globe and our consciousness, but the economic impact of the attacks was remarkably moderate.

And now, our nation is under attack, again. Not by radicals, and not just in three places in the U.S., but all places throughout the world, in every state, every city, with every citizen a potential victim. This microscopic enemy, the COVID-19 virus, is wreaking physical, psychological and economic damage on our country and the world on a scale not seen since the Great Depression.

And perhaps nowhere is the pandemic having as damaging and immediate an economic impact as on our consumer driven economy. All along the supply chain, privately held manufacturing, wholesale and retail companies are facing extreme uncertainty. So, let’s take a look at the “supply chain.” Those two simple words succinctly and accurately describe the often-complicated life of a consumer product—from its inception as an idea in R&D and design departments to the sales it rings up in a retail store and the clicks it generates for online and mobile purchases.

For any consumer product to be successful, every phase of its life cycle from development to production to distribution and eventually into the hands of its rightful owner, the consumer, every “link in the chain,” must successfully fulfill its part.

The COVID-19 virus crisis has done an unprecedented job of exposing just how fragile the “supply chain” in a global marketplace is. It really comes down to this: If consumers are told they cannot go out to stores, restaurants and theatres; if only essential products are available for shipment online and in grocery stores and pharmacies, that stoppage, that blockade on consumerism (that is discretionary spending), works its way up, or through, the supply chain. It weakens every link from wholesale distribution, to logistics and transportation, to suppliers and manufacturers in any place and everyplace throughout the world. In terms of the impact of the virus crisis on retail sales, one early estimate on March 19, 2020, predicted perhaps an 8% to 10% sales drop off for 2020. And it is rather startling what is at stake at the retail level:

According to a March 23, 2020, article in The New York Times: The “American retail industry and its associated industries represent 52 million jobs—one in four of all workers—and almost $4 trillion worth of gross domestic product, according to data from the National Retail Federation.”

This takes “too big to fail” to a whole new level. However, if there is any moderately good news, with city and state-wide and in certain cases, country-wide quarantines in place and social distancing enacted, it appears the crisis will be temporary. That is why, as this is being written, major U.S. retailers and manufacturers in the apparel industry are appealing to the federal government for funding of a “bridge, not a bailout,” according to the Times article.

Eventually, as COVID-19 wanes, the shopping lockdown will end. Meaning, in the interim, during the “bridge,” it is the job of all links in the supply chain to do everything in their power to survive the blockade on consumerism. And it is my job, and firms like ours, who work with and advise privately-owned businesses to do all we can to help see you through this temporary crisis.

For privately owned businesses in the global supply chain, staying whole will mean staying strong, being innovative, tapping your own and your team’s talents like never before, leveraging strengths, being honest about and shoring up weaknesses, having the nerve and smarts to push those who supply and support you, and having the compassion, where possible, to ease up on those you supply. It means having a frank and honest conversation with the not-so-invisible hand within the supply chain, your finance partner, the bank.  The level of uncertainty that you are currently experiencing is most likely only matched by your bank.

It is not our intention here to give a rah-rah message, but to offer some counsel on things you can do to get through this in one piece, and maybe come out the other end a stronger piece. For example, you may find some relief through government programs. The federal government has given a three-month reprieve for filing and paying last year’s taxes.

And, of course, there is the stimulus package passed by the Senate and House and signed by the president on March 27, 2020. According to the $2 trillion bill, it includes $350 billion to help small businesses (with less than 500 employees) with loans of up to $10 million. It also includes many favorable provisions, including loan forgiveness equal to amount spent on payroll for 8-week period after the loan origination.  Now that the package has passed and been signed, details regarding qualification and application processes will become readily available.

Speaking of small businesses, the Small Business Administration (SBA) has initiated an Economic Injury Disaster Loan Program supplying small businesses with working capital loans of up to $2 million. While this may not work for larger businesses in the supply chain, if you think this offers some relief, read more for more information.

States and even municipalities are also working on or offering COVID-19 programs, so be sure to take just a few minutes to go to their websites to see if programs are, or will be available. In New York City, for example, if you employ fewer than 100 employees and have seen sales decrease of 25% or more, you should be eligible for a zero-interest loan of up to $75,000. Granted, a small figure, but if you are in the Big Apple, for details  click here.

But as your trusted adviser, the truth is, if you are going to get through this crisis, as has been the case your whole business life, the solution really rests with you. That means, taking action, right now.

And, not to oversimplify how complicated things will be for you in the coming weeks, but perhaps it might make it somewhat less complicated if we break an action plan into three parts: Banks, Vendors, and Customers. But as we do, remember two things:

  1. Remind those with whom you are bargaining that you are partners. So, if you succeed, they succeed. If you fail, you both pay the price.
  2. While COVID-19 is not 9/11, it also is not 2008. The Great Recession came from a debt structure that undermined the whole economic system of the country. It was a balancing act doomed to tumble down. In contrast, COVID-19 smashed into a strong economy, with strong financials, a roaring stock market, and miniscule unemployment. It was healthy, not on life-support, so it should and will recover.


Nearly every article written about which companies will be open for business post-virus talks about two things: a business’s debt load and its balance sheet. For retailers, this goes all the way up to the giants, some of which are groaning under debt, while others have their debt under control. This is no different for privately owned businesses within that supply chain. And while banks aren’t thought of as within the actual supply chain, they are the hand that supports every element of it by providing credit to expand, innovate, cover the ebbs and flows of seasonality and rough patches along the way.

Of course, all businesses in the supply chain have a banking partner that they rely on. With the virus crisis, there could not be a better time for you, and your bank, and your trusted advisors, to take a really hard look at your business’ financial position, no matter where you are in the supply chain. For starters, an honest assessment of just how leveraged you are, your liquidity and cash flow requirements over the next 90 days, updated sales and sourcing projections, planned workforce reductions, etc.

But, as is also repeated by the countless stories about surviving the crisis, it is essential that before you sit down with the bank, you have a plan. No matter what relief you are requesting, the first thing the bank will ask is, “What is your plan?” Now, during the shutdown, and after.


In the supply chain, everyone has a supplier, and everyone is a supplier. Your suppliers are, of course, talking to their suppliers and their banks, and everyone is looking for the same thing: some breathing room and flexibility on payments. And if you plan to ask you suppliers and vendors (including landlords) for a hiatus on payments, or to return goods that never got out of the boxes, just like the banks, you need to present them with a plan.


Again, all three links in the supply chain are and have customers. Let’s start at the retail end of the chain:

If you are a retailer, and depending where you are, you have been instructed to lock out the people who buy from you. But, keep contact with your customers, maintain a relationship through online presence and social media (assuming these costs have been accounted for in your revised current working plan!).

Announce to your stakeholders (customers and employees are your biggest stakeholders) your post-virus plans. Maybe new services, like delivery, or a new online option. Do not let your website go dark. Refresh it, again, with relevant information. Maybe you let visitors know about those new services with discounts for loyal patrons. In short: Look alive.

If you are a wholesaler of discretionary consumer products, your primary customers are most likely retailers. Clearly your stuff on their shelves and in their warehouses, won’t be going anywhere for a while. So, most likely they will be asking you for breathing room, and clearly, give it where you can, starting with your best customers. Set a realistic expectation and plan with both customers and suppliers to push orders out 30 days, 60 days.  Negotiate future incentives and accommodations for cancelled orders. In short, maintain the relationships that have sustained the business in good times as well as in these challenging times.

National and international manufacturers are grappling with supply chain and workforce disruption, just like their customers (wholesale distributors) and suppliers (raw material and packaging supply) in the supply chain link. Like wholesalers, the challenges will be to balance reduction in production orders with operational cash flow requirements.  The key will be to effectively communicate to your customer base the plan to navigate this unprecedented disruption of the supply chain

For privately owned business, one last thing: Check with your insurance agent and review your business interruption insurance coverage for business losses sustained for the economic impact of COVID-19.  While it is unlikely that supply chain challenges and fear of contagion could be directly linked to property damage and business loss under standard policy terms and conditions, a review is an opportunity to understand your coverage and better plan for the next hundred-year flood, which now seem to be recurring in 8 to 10 year intervals.

In closing, we’ll leave you with a correction from Charles Darwin. He once said, “People always describe my theories as ‘survival of the fittest,’ when actually they should be called ‘survival of the most flexible.’” Or, put another way: Survival of the smartest.