No one can say yet what the new coronavirus, COVID-19, will cost the world in loss of life and value.
What’s clear is that the virus is spreading more rapidly than previous global health threats, and that it will likely create supply chain challenges for manufacturers of all sizes in virtually all industries.
Since this blog was first published on March 2, 2020, COVID-19 has exploded around the world. Widespread adoption of social distancing-- a term most of us had never heard until a few weeks ago-- has upended the global economy and daily life in ways no one could have imagined in February.
An Evolving Risk
Early media reports called the disease “the Coronavirus.” Technically, coronavirus refers to a type of virus that includes the common cold.
A recent online piece from the Johns Hopkins School of Medicine biocontainment unit explains that COVID-19 got its name as follows. COVI for coronavirus, D for disease, and 19 for the year it was identified. Symptoms include cough, fever, and shortness of breath.
It’s thought that the virus likely emerged from an animal source and now seems to be spreading from person to person. It first appeared in Wuhan, China, in December 2019.
As of this post (updated on 3/19/2020), the disease has been detected in more than 240,000 people in 160 countries. So far, COVID-19 has claimed more than 9,800 lives, including 153 in the U.S. Like the flu, COVID-19 appears to pose the most serious mortality risks to the elderly and those with compromised health, although the CDC reports younger patients are being hospitalized.
See this interactive map from Johns Hopkins shows real-time COVID-19 data on Total Confirmed, Total Deaths, and Total Recovered cases.
What Should Manufacturers Expect?
In a recent address to the Retail Industry Leaders Association from the Chairman of DHL data and analytics unit Resilience360, David Shillingford outlined three near and long-term impacts going forward.
- Shortages of raw ingredients and components due to temporary closures of ports and factories in China as well as current and likely bankruptcies of some suppliers will force manufacturers to seek new sources.
- Shifts in demand patterns. Already consumers in China are curtailing physical shopping and sales of luxury goods are slumping. At the same time, online sales of home hygiene products have jumped 150%. Your risk may be greater or smaller, but it’s unlikely any industry will be spared some impact.
- Uncertainty over the duration of COVID-19 to lead manufacturers to invoke force majeure provisions to avoid breach claims and SLA penalties.
What Should Companies Do to Mitigate Supply Chain Risk?
Shillingford also laid out the following strategies to help companies anticipate risks and disruptions.:
- Coordinate with your procurement team. They’re in the best position to know how COVID-19 is affecting your suppliers.
- Map your supply chain so you’ll know who and where your suppliers are—and the same for their suppliers.
- Contact your suppliers and ask how the COVID-19 outbreak is affecting them—and what that means for your company.
- Think outside the box and go beyond historical patterns when looking at your demand data—COVID-19’s impact on demand is a moving target right now.
- Integrate risk management practices into your supply chain operations. One of the silver lining outcomes of the COVID-19 crisis could be agreement on the need to make risk management functions part of the supply chain department’s responsibilities.
- Wash your hands according to CDC guidelines. It may sound like a trivial response given the global and still-spreading scale of the disease but taking care of yourself and your team is the most important thing you can do.
A Positive Note
While some analysts expect to see the impact on global supply chains peak by mid-March, we won’t know the long-term effects on U.S. companies and consumers for months. Despite the ongoing uncertainty, the current outbreak can also be an ideal opportunity to evaluate your supply chain management toolkit, including your B2B integration, EDI, EAI, and MFT solutions.
Having delivered support to global and globally-integrated manufacturers since 1994, we’re confident of one thing. Having maximum real time visibility into your supply chain’s potential break points—and the agility to pivot if necessary—may be your best response to whatever yet-to-emerge events may be brewing over the horizon.
Download our white paper to help you assess, plan, and secure buy-in for the funding and resources required to build a B2B integration environment that's capable of giving your organization the visibility into the operations of trading partners who may be located across the globe, the ability to communicate with them, and the agility to pivot if circumstances demand it.
In the meantime, if you do find yourself taxed with processing high volumes of orders, tracking important shipments, and increased manufacturing, don’t hesitate reach out.
We have experienced full and part-time consultants available to help you meet increased demands, troubleshoot, and get back to business.
Further Reading
As you assess impacts and plan your company’s response to the COVID-19 outbreak, you may find these links helpful:
http://www.fda.gov/news-events/press-announcements/coronavirus-covid-19-supply-chain-update
https://www.pharmaceutical-technology.com/comment/covid-19-impact-supply-chains/
