Coronavirus (Covid-19) is having a significant effect around the world both on a micro level and a macro level. Travel and logistics may be disrupted and the flow of materials impacted as a result. Labour may also be impacted as employees become ill or quarantined. Coronavirus is inevitably having a significant impact on local and global supply chains.
"The growing threat of the pandemic"
Supply chain managers will have to act very quickly now to build stocks where they can of essential components, or seek alternative sources of supply to minimise further impact on their operations as the shortages caused by the shutdown of China’s factories feeds through the supply chain. This is happening in other regions of the world too, for example Northern Italy, in what seems to be a very short space of time. For some businesses it appears it is already too late to put those mitigation strategies in place as empty supermarket shelves and shortages on production lines have started to appear. With consumers stockpiling essential items, this is likely to exacerbate the supply chain shortages.
Practical steps for supply chain managers
- Prioritise your high risk supply sources not just by geography, but by sector/commodity/value to the business
- Analyse your supply chain beyond your tier one suppliers to fully understand your exposure to the affected countries and regions
- Review the business approach to inventory eg. build inventory around own stores to reduce impact from port delays, what additional financial resources are needed to do this if appropriate
- Don’t rely on forecasted supply data or current inventory levels
- Calculate your stock tolerance over the predicted “at risk” period to determine your pinch points
- Keep communication channels open with your key suppliers
- Continue to seek out alternative sources of supply as well as alternative transportation routes/li>
- Factor in increased transit times to alternative ports
- Re-assess travel plans and use digital technology such as teleconferencing instead of face-to-face meetings
- Calculate any additional costs that you may incur eg. non-delivery of goods to your customers
Read More Below:
CIPS 16 March 2020. Before she heard news media reports about coronavirus, Lucie Chami, CPO at Vitex Pharmaceuticals in Australia learned one of her suppliers had a “medical problem” delaying production. Within days she was in the thick of a procurement crisis. Lucie tells her story in this edition of Global Sourcing Insights from CIPS, and Seshagopal Kannan, a Beroe, Inc. consultant in Bangladore, India joins in. Kannan leads the crisis management analysis of this coronavirus for his firm.
Supply Management Resources