Supply chain managers must consider the wellbeing of their workforce, product availability, and cost implications as they aim to manage the impact of Covid-19.
The three areas are key to initial crisis management for firms dealing with supply chain disruption, according to research firm Gartner.
Sarah Watt, senior director analyst with the Gartner Supply Chain practice, said: “As Covid-19 spreads globally, we are seeing increased supply chain disruption, but also changes in consumer spending habits.
“Supply has been impacted in three primary ways: limited access to employees due to quarantines, factory closures or manufacturing slowdowns, and limited access to logistics to move goods. Most supply chain organisations are in crisis management, assessing impacts and response on a daily, if not hourly basis.”
As businesses around the world try to limit the impact of the virus, many employees have been instructed to work from home, and travel restrictions have been placed. Goods are not able to be produced in factories and shipped as normal.
“As the virus extends globally, supply chain leaders need to think about how to protect the health of workers, and support individuals who are ill. Providing clear and consistent communication through human resources and travel security is essential,” Watt said.
“This crisis is ongoing, and there is a risk that crisis management teams become fatigued and make poor decisions.”
The virus outbreak has the potential to change the competitive landscape, Gartner warned.
Firms are likely to turn to alternative suppliers for products if their current suppliers are not able to deliver. Brand loyalty may be able to help with customer retention, but other customers may begin to adopt conservative shopping habits.
Supply chain leaders must analyse and forecast the impact of Covid-19 on customer demand and product availability.
“Supply chain organisations need to frequently reassess their supply and demand plans based on the evolution of the virus and consumer sentiment,” Watt continued.
“Supply chains may also experience sharp increases in demand for products or unexpected consequences from the event, such as panic buying for essential items.”
The financial impact of the virus and how it will affect companies meeting their financial objectives must be focused on.
“Even contractually agreed prices and quantities of materials might no longer be valid. Suppliers could invoke force majeure clauses or otherwise look to pass on additional costs up through the supply chain,” Watt said.
Additional costs related to Covid-19 should be treated as an issue that concerns the whole organisation rather than a single department. Costs can then be examined against the firm’s ability to achieve its strategic objectives and manage stakeholder expectations.
“It’s also a good idea to sit together with the legal department and analyse all supplier contracts. When the time renewal comes, make sure that the organisation is financially protected against similar situations that might occur in the future,” Watt said.
“Supply chains will not be the same after this event. There will be an increased focus on resilience, risk exposure and business continuity plans going forward.”
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