As the impacts of the global spread of COVID-19 continue to be felt by businesses everywhere, one area that is increasingly strained is the supply chain. If your business has not already seen disruption to its supply chain, chances are a need to adjust planning and make accommodations for disruption are right around the corner.
A recent survey from ISM finds the coronavirus outbreak has already resulted in supply chain disruptions for nearly three-quarters of U.S. companies.
“The consequences of a pandemic event are hard to predict,” said Koray Köse, senior director analyst at Gartner, in a blog post about supply chain security. “However, the risks always exist and are augmented with further globalization and integration of supply chains. 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.”
Gartner officials predict the supply chain could be impacted in some of the following ways:
- Materials: Supply shortages of materials or finished goods coming from or routed through logistical hubs in impacted areas.
- Labor: White- and blue-collar labor may not be available due to quarantine guidelines or illness.
- Logistics: Established hubs and supply networks may experience limitations in capacity and availability so that even if materials are available, they would be stuck elsewhere. Finding alternative routes and means of transportation will become difficult.
“Expect the unexpected, especially when core suppliers are in the front line of disruptions,” said James B. Rice, Jr., deputy director of the MIT Center for Transportation & Logistics, in a post on Harvard Business Review.
Short-Term Modifications in Response
What can risk managers tasked with business continuity be doing now during the coronavirus pandemic to either minimize supply chain disruptions or help mitigate impacts on businesses?
Rice suggests in the short term that security managers create a comprehensive, emergency operations center.
“Most organizations today have some semblance of an emergency operations center (EOC), but in our studies, we’ve observed that these EOCs tend to exist only at the corporate or business unit level,” he said. “That’s not good enough; a deeper, more detailed EOC structure and process is necessary.”
He also suggested businesses work toward a greater level of visibility through mapping upstream suppliers several tiers back. And it should go without saying, but creating a business continuity plan (if you don’t already have one in place) is essential now and should include backup plans for transportation, communications, supply and cash flow, Rice said. People also should be considered in the backup plan, as all of the remote and work-from-home arrangements will no doubt also impact each organization differently.
Lessons Learned After the Dust Settles
Gartner’s Köse noted that once the impact of the coronavirus crisis is fully realized and normalcy has resumed, businesses need to learn from the lessons experienced now and make changes to be better prepared for the next scenario that may impact the supply chain.
“Supply chain leaders and their teams can, for example, conduct a scenario planning exercise and develop action plans. This is the time to discover or develop alternative sources and diversify value chains,” he says.
Monitoring for Greater Security in the Future
In a co-authored post on Harvard Business Review, Bindiya Vakil, a founding member of the Global Supply Chain Resiliency Council and CEO of Resilinc, and Tom Linton, a former supply chain officer and currently an advisor to Resilinc, recommended business leaders invest in round-the-clock monitoring of their global suppliers.
“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,” the authors wrote.
MIT’s Rice suggested taking a deeper look at supply chain design for the future with more reliance on local and second sources going forward.
“It’s impossible to anticipate the arrival of global crises such as the coronavirus outbreak, but firms can mitigate their impacts by taking supply chain preparedness to a higher level,” he said.