Coronavirus Aftershock: Lessons on Mitigating Risk When Unforeseen Events Disrupt the Supply Chain
The COVID-19 outbreak might be the latest event to threaten global supply chains and economies—but it won’t be the last. Here’s how experts recommend safeguarding your systems and operations.
In late February, ratings agency Moody lowered its global auto sales forecast amid the escalating coronavirus outbreak, predicting a 2.5% decline in sales as many consumers in China—the world’s largest car market—isolated themselves from public spaces. Aside from this decline in sales, Moody warned of the “potential for more severe disruptions in manufacturing supply chains.”
Not two weeks later, the DOW took a nosedive, falling more than 1,900 points in a single day. Stocks in Europe and Asia also fell sharply as companies closed plants and stores, halted travel, delayed product launches and faced production shortages.
The novel coronavirus scare is the latest example of how unforeseen events can easily (and quickly) cripple both consumer demand and supply chains, sending shockwaves through the global economy. Because of COVID-19’s rapid spread and unpredictable nature, it presents companies worldwide with an almost unprecedented stress test. Are current systems and processes designed to withstand (or adapt to) a crisis of this scale? What steps can be taken to mitigate supply chain disruptions (and their enormous ripple effects) when the next disaster strikes?
Companies’ coronavirus preparedness in 2020 (or lack thereof) is a fascinating—if sobering—study, and one that’s garnering plenty of media coverage as the situation unfolds. Here are some of the top takeaways so far.
Supply chain monitoring & mapping is crucial, now more than ever.
More real-time information means more time to prepare and react to events like the coronavirus (and its impact on suppliers). According to Harvard Business Review, the ability to monitor global suppliers around-the-clock is now a must:
“Just like we wouldn’t drive our car without insurance, we cannot run a globally dispersed supply chain in today’s fast-changing world without being in the know about everyday news that could cause disruptions in the coming days.”
Companies that have not yet implemented supply chain visibility solutions (like Elemica’s “See”) risk being caught off guard by events like coronavirus—and scrambling to come up with contingency plans after it’s too late to curtail bottom-line damage.
You need to understand your supply chain from top to bottom.
As Lucid Motor executive Peter Hasenkamp pointedly stated: “It takes 2,500 parts to build a car, but only one not to.” And yet, Bain & Co. estimated that up to 60% of executives “have no knowledge of the items in their supply chain beyond the tier one group.” Consider also that 5 million companies worldwide have one or more lower-tier suppliers in the regions hit hardest by the new coronavirus (including 938 of the Fortune 1,000). That’s a huge blind spot for far too many.
But with so many geographically disparate suppliers across tiers, how are large companies to monitor all of them, along with all of the events that pose risk? That’s where solutions like Elemica Risk come in.
Risk is designed to do the monitoring for you, correlating incidents deemed threatening with your actual network assets, orders, and shipments, so you can understand the potential impact of disruptive events and respond accordingly.
Diversify, diversify, diversify.
Although there’s an inherent risk in choosing new suppliers, widespread events like coronavirus require companies to not only have a Plan B—but a Plan C, or even D, in place. According to a recent piece in Supply Chain Dive, “Plan C should include a supply chain map that extends all the way to raw materials independently — potentially meaning taking operations outside of Asia entirely.”
When the dust settles, it’ll be a good opportunity for companies to take a good look at their suppliers across tiers and identify opportunities to diversify, minimizing the risk imposed by having too many key suppliers within one geographical area.
A supplier management platform like Elemica Buy can help companies identify suppliers that meet their needs, with a sourcing product suite that connects your company to the largest process industry sourcing ecosystem.
And, with convenient tools like PO/invoice management and Quicklink Email Buy, you’ll be able to onboard these new suppliers more easily.
Don’t be caught off guard when the next pandemic or disaster strikes. Discover solutions that have already empowered our clients to stay one step ahead of disruptive events (and gain peace of mind). Contact a specialist today to schedule a consultation and learn what these powerful supply chain tools can mean for your business.