Coronavirus spreads panic in firms with global supply chains

Concern about effective supplier relationship management and supply chain management more broadly is turning to…...

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Concern about effective supplier relationship management and supply chain management more broadly is turning to panic among many firms with global supply networks following the coronavirus outbreak, a supply chain consultant has stated.

Supply chain consultant Rosemary Coates notes that the virus caused 100 deaths a fortnight ago – today, the crisis has progressed geometrically, taking the lives of almost 1,000 people, while 40,000 are currently known to be infected.

The infection has ‘gone global’ and no vaccine is presently available.

Several major airlines (including American, Delta and United) have suspended flights into and out of the Wuhan region of China and restrictions on ship dockings are multiplying.

The spreading impact is illustrated by the auto-manufacturer Hyundai, which had to suspend operations in a Korean facility because no parts had been received from China.

Former efficiency-promoting methods such as the ‘Lean Manufacturing’ techniques employed by Hyundai, which are designed to maintain minimal inventories with parts being delivered just in time, are suddenly becoming sources of supply vulnerability.

Procurement professionals in many companies are already working around the clock on new strategic sourcing initiatives in a bid to stock up on inventory in efforts to outlast the crisis.

However, this in itself may cause shortages and drive up prices as companies begin hoarding parts.

Coates emphasises that the crisis has illustrated the critical importance of advanced forward planning as an integral component of risk management: companies that have already planned for disasters such as the current viral outbreak, or for other disruptors such as trade wars or natural or meteorological disasters, are in a much better position to weather this storm than companies that haven’t.

Addressing these potential but realistic crises, Coates says: “They will all affect your supply chains. If you are already working on alternate plans, review them again and add detail and then give them a test. Make sure all your alternate plans will work.”

It is now time, she concludes, for businesses to elevate their supply chain threat level and act now.

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