The subject around supply chain management is not gaining much attention from the corporate world – at least in less developed economies. Supply chain processes including procurement, logistics, production, and distribution are often viewed as support services rather than strategic enablers to run an efficient, profitable business.
The novel coronavirus (COVID-19) shuts down factories, hold-off shipments, bans travel, constrains material supply, and eventually leads to panic buying. These are supply chain links, the very thing the virus attacks – of course, on top of public health.
The supply chain is the network of processes and companies involved in ensuring the efficient flow of products from product development to conversion to consumption to product returns to sustainability. Almost everything. Most supply chains today are global and complex to handle as raw materials and services are sourced overseas, therefore, any disruption in one network has a ripple effect on the entire supply chain. The process to manage the supply chain is called supply chain management.
The coronavirus will push the significance of supply chain management even further throughout public health, economy, and business risks.
SUPPLY CHAIN RESILIENCY IS PIVOTAL FOR SURVIVAL
With the growing uncertainty agitating around the pandemic, countries have imposed aggressive measures to contain the outbreak such as shutting down businesses, travel bans, quarantines, among others. These restrictions stretch the supply chain to its limits marked by a massive disruption to manufacturers, suppliers, and all supply chain stakeholders.
Headlines about lockdowns have gone mainstream causing panic buying among consumers. Hygiene products such as alcohol and sanitizers are flying off shelves shortly after several lockdown announcements. In response, manufacturers are quickly reconfiguring their supply chain to respond to an emergency.
Along with many firms, San Miguel Corporation announced to convert their gin production to meet needed alcohol volumes for hospitals. A footwear company, New Balance, has started developing and manufacturing facial masks to meet growing demand. Moreover, we have seen food suppliers, grocery stores, and government agencies (in some countries) distributing food to the public.
All these efforts are supply chain activities critical for peoples’ survival.
THE LIFEBLOOD OF THE ECONOMY
The deepening impact of the coronavirus is a wake-up call for executives to ensure raw materials are secured and the flow of goods is protected. Shortly after the outbreak, news about firms’ concerns over their supply chain began to mount as factories, ports, and businesses in China have halted operations due to mandated lockdowns.
Customers outside of China are casting fears over raw materials shortage, delays in receiving orders, and the visibility of supply risks in the pipeline.
Repercussions of coronavirus distressed the global supply chains sending economic trauma to capital markets across the globe. The International Monetary Fund (IMF) warned that the pandemic will cause a global recession in 2020 that could be worse than the 2009 financial crisis. When supply chains are crippled, financials begin to shrink, and eventually taking hit on the world economy.
RISKS ASSESSMENT IS PART OF SUPPLY CHAIN MANAGEMENT
The coronavirus brings the supply chain management to a spotlight as organizations are scrambling to assess their exposure to vulnerabilities and risks from outbreak ramifications. However, companies that have their supply chain mapped out before the pandemic are well prepared for disruptions because they already have information on the potential risks the virus have on their suppliers, inventory, and production.
Close to 75% of companies said that coronavirus disrupted their supply chains including capacity constraints and longer lead times. Most of them suffer from receiving order delays while some have difficulty in obtaining information, all from China. As a result, 1 in 6 firms reduce their revenue targets due to the coronavirus outbreak.
The coronavirus compels organizations to diversify their supply sources, a move that reduces supply reliance from clustered suppliers in China.
COVID-19 is sending a clear message to the business world; to prioritize and invest in supply chain resiliency initiatives to protect businesses from collapsing. As simple as obtaining information before the disruption strikes to gain visibility and to understand the supply chain structure can be a strategic move a firm can do.
After all, companies that invest in their supply chain and leverage the current situation to build resiliency are well prepared for the next disruption than those who just watch and see and do nothing or little in their supply chain.