More than a quarter of JCB's Chinese suppliers remain closed after the coronavirus outbreak © JCB
More than a quarter of JCB's Chinese suppliers remain closed after the coronavirus outbreak © JCB

JCB to cut production as coronavirus hits supply chain

14 February 2020

JCB plans to cut production from 17 February as it faces a shortage of parts due to supply chain disruption caused by the coronavirus. 

Mark Turner, chief operating officer at JCB, explained while UK production is yet to be affected by shortages, more than a quarter of the digger-maker’s Chinese suppliers remain closed following the outbreak of the coronavirus, officially named Covid-19, which originated in the Hubei region of China. 

“Those that have reopened are working at reduced capacity and are struggling to make shipments,” said Turner. 

“It is therefore clear that the inbound supply of certain components from Chinese partners will be disrupted in the coming weeks as they seek to replenish their stocks. This inevitably means we will not have the required amount of parts needed to build our forecast number of machines in the short term,” he said. 

JCB is reducing weekly working hours for 4,000 staff from 39 hours to 34 hours and overtime will be suspended to account for potential shortages. Workers will still be paid for a 39-hour week and will work additional hours later in the year.

“These measures will ensure that, while we will produce machines in lower than anticipated numbers, we will do so with the same number of employees, whose skills we will need to fulfil customers’ orders when the situation returns to normal.

“The disruption to the component supply chain in the UK comes at a time when demand for JCB products is very strong, so while this course of action is very unfortunate, it is absolutely necessary to protect the business and our skill base.”

Last week, Fiat-Chrysler warned it could temporarily close one of its European manufacturing plants as four of its Chinese suppliers had been affected by the virus. 

Meanwhile, sportswear brand Under Armour said it expects to take a $50-60m hit to revenue for its first quarter due to the coronavirus outbreak. 

Patrik Frisk, Under Armour’s CEO, told investors the brand could experience supply chain challenges in the second half of the year, including impact on materials such as fabric trim, package sourcing, and potential delays and capacity challenges.

“With respect to factories, we're continuing to see closures, changing timelines of when they might reopen, and trying to assess what it means for production fulfilment, capacity and the prioritisation of which products to make,” he said. 

"We think it's reasonable to expect industry-wide delays in terms of delivery around the world, including potentially missed shipment and service windows and the need for increased air freight and additional measures at ports that could create unforeseen congestion."

The confirmed number of cases of the virus has reached 64,435 people globally, while over 1,380 have died. 

Earlier this week, Professor Neil Ferguson, director of the MRC Centre for Global Infectious Disease Analysis at Imperial College London, told BBC Radio 4’s Today programme it was estimated that in the UK one in three cases of the virus were being detected. 

“At the moment, our best estimates are really the transmission will get going in the UK in the next few weeks unless we are very lucky, probably peak in two or three months after that.”

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