Immunizing Your Supply Chain Against Disruption
February 26, 2020
The coronavirus is headline news, but it’s also causing a massive headache for business. Efforts to contain the virus have seriously impacted global supply chains and there are repercussions for supply chain managers across industries. The message is clear: now is the time to re-visit your supply chain continuity plans.
Multinational businesses are still recovering from the fading uncertainties from the US-China trade disagreements and adding a deadly virus, which has spread across international borders, has only compounded global economic disruption. Factories that normally would have reopened after the Lunar New Year in China continue to struggle with a worker shortage.
The disease, now known officially as COVID-2019, originated in Wuhan, China, in late 2019. The World Health Organization confirmed nearly 43,000 cases of the acute respiratory disease as of February 11, 2020.
The effects on business have been immediate with long-term implications. Apple, for example, no longer can “shuttle… some 50 of its executives between California and China each day” due to the suspension of flights by major airlines to and from the mainland. And Chinese assembly plants aren’t yet back at full capacity. The virus “could lead to Apple shipping 5-10% fewer iPhones this quarter and could scupper its plans to ramp up production of its popular AirPods,” according to the Economist.
Industries outside of technology are equally hard hit. As China is the world’s largest garment producer, fashion supply chains are left scrambling. Under Armour’s CEO Patrik Frisk told investors and analysts that sourcing fabrics, trims, and packaging “could prove to be difficult in the second half of the year.” The auto industry isn’t immune either, as CNN reported that only 59 of the 183 car manufacturers in China’s Association of Automobile Manufacturers had resumed production as of Feb. 13th. Plus, with so many parts suppliers in China, other car plants are suffering. For instance, a Hyundai manufacturing plant in Korea suspended operations due to a lack of parts from China.
Along with factory closures, global shipping impacts are adding to the troubles. Not only are suspended flights and air cargo operations hampering the flow of product out of China, but a reduction in seaborne vessels is also “clogging up…the arteries of global trade.” For freight that is able to move through this strained system, there’s a price for that. Major carrier Flexport states, “restricted capacity will eventually cause competition for space, increased freight prices and extended shipping times.”
Planning for Supply Chain Consistency
The coronavirus situation serves as a reminder of the importance of proactive planning for supply chain continuity.
Globalization and integration of supply chains presents a real risk, Gartner Senior Director Analyst Koray Köse stated. And it’s an inevitable one. “It is not a matter of if it will happen but to change the focus to be prepared when it happens. That is a shift of mindset in risk management and business continuity.”
Having a Plan B, and even C and D, can make a difference to your business’s agility in responding to implications from a crisis, such as the coronavirus. This kind of flexibility means:
- Planning ahead
- Researching alternative options
- Allocating budget for varied services
- Communicating openly with supply chain partners
Gartner recommends developing supply chain monitoring and response programs. These require transparency throughout global tiers, which calls for collaboration with supplier-partners throughout the supply chain.
Enhanced communication with supplier-partners helps minimize disruption to the OEM supply chain by going above essential information, such as where and how much inventory is in safety stock, to receiving real-time supplier-partner production statuses and sharing customer demand forecasts as quickly as they are updated internally.
Diagnose other areas of risk exposure, and be aware of the risk throughout your supply chain network. Take the steps to include supplier-partners in risk planning to ensure business continuity and strengthen your relationships – those same relationships may very well be your best defense. Learn more about the supply chain resiliency options available with your metal fabrication strategic partnership by contacting Miller Fabrication Solutions today.