What will the Coronavirus do to supply chains across the globe?
The Coronavirus is wreaking havoc on a global basis as it spreads exponentially across continental lines while causing stocks to stumble, supply chains to slow, and transportation operations to be disrupted. The Dow Jones industrial average fell 200 points last week when news that the virus had spread beyond the area where the first outbreak occurred. Economist Eswar Prasad, former head of the International Monetary Fund’s China unit says in the Washington Post, “A broader spread of this disease has the potential to disrupt travel, trade and supply chains throughout Asia, with knock-on effects on the world economy, since Asia is now a key driver of global growth.”
Predictions as to how much this can change the economy in China and other nearby countries are appearing in many news outlets, especially since Wuhan is a “key transportation hub for goods moving from China’s interior to the coast,” notes The Post. The area is also known as a key supplier of materials for electronics, pharmaceuticals, and automotive supply chains.
Across China, more and more public venues are closing temporarily in an effort to diffuse the spread of the virus. And airports across the globe have enacted measures to test travelers coming from China for the virus. About 13 million people live in the area around Wuhan, but sixteen other cities have now been locked down, equating to over 46 million people.
Bloomberg cites, “For global corporations, Wuhan is an important hub. Of about 2,000 cities in China with factories and other facilities in Bloomberg’s supply chain database, the city ranks 13th, with about 500 facilities. The province of Hubei has 1,016, making it seventh of 32 such jurisdictions. U.S.-based companies have 44 facilities there, and European ones about 40, the data show. Many plants are in the auto and transportation industries, and big names include PepsiCo Inc. and Siemens AG.”
A summary of what companies are doing in China about the virus as of this weekend:
- Honda will evacuate staff and their families from Wuhan
- Peugeot carmaker Groupe PSA will evacuate staff and families
- Clothing retailer H&M has closed 13 of its stores in the region
- Ikea closed its warehouse in Wuhan
- McDonald’s closed some restaurants across 5 cities temporarily
- Disneyland in Shanghai closed on 1.25.20
- Starbucks closed some of its locations across the region
The CDC has 110 patients, who recently traveled to China, under investigation – and five people, as of today, have been diagnosed with the virus in the US, with predictions for more to be stricken. If the virus continues to spread, more and more supply chains will be affected as operations involving labor, supplies, production, and transport are disturbed.
What can supply chain executives do?
Supply chain managers need to be proactive to ensure their organizations are safe from disruptions to their supply chains caused by natural disasters, diseases, weather, loss of a supplier or transport mode, and more. Supply Chain Managers using a Digital Supply Network (DSN) can find and deliver from different sources of supply faster by being connected to an overall network. A DSN will better enable the enterprise to meet the demand from their customers using different suppliers and at less risk.
The network provides real-time access to demand and supply signals by leveraging alternative channels for replenishments and delivery mechanisms. So whether it is; reacting to increases in pharmaceutical ingredients requirement outside of the normal China suppliers, electronic components for mobile phones that are growing in demand, automotive parts, or specialty, chemicals and minerals, a Digital Supply Network connected to an organization’s suppliers and logistics service providers can act more quickly to changing needs and meet demand faster when faced with unforeseen occurrences.