Ebola – The Deadly Butterfly Fluttering Through The Supply Chain

butterfly

Unfortunately, as we all know, Ebola has rapidly gone from being an obscure illness to becoming the headline of the day. At Spend Matters we have followed this as well. Note this article in particular. Sadly, this entry claiming “there have only been 7 outbreaks in humans” is now quite dated.

While not ignoring the suffering of those afflicted, we wonder how this is changing supply chains around the world. So let’s take a renewed look based on what has happened lately. Currently primarily Liberia, Sierra Leone, Guinea, and secondarily, Senegal and Nigeria are affected – but the supply chain effects go further, far further.

Spend Matters has spoken with 2 of the leading supply chain risk mapping companies – Resilinc as well as riskmethods – and gotten some updates from them about what their clients are seeing and doing.

As it turns out, despite our initial assessment that the impact on corporate supply chains would be minimal (considering the relatively small presence of African products in the global marketplace) some verticals are actually quite exposed. This is where the “butterfly effect” comes in and the African (at the moment) tragedy has supply chain effects in far-flung places like Malaysia and Indonesia.

Mapping the Supply Chain

A quick step back, the Ebola outbreak is an example of why manufacturers urgently need to map their physical supply chain, understand the geographical and political exposure in order to know what their sub-tier suppliers’ supply chains look like. If you can’t describe it, you can’t begin to manage it!

Resilinc shared one example from the life science supply chain – both how it is at the moment, and how it could be further impacted. This is especially true for its life science customers whose primary concern is patient safety. In the West Africa/Ebola case, Resilinc anticipates supply impact for some sub-tier raw materials, but hopefully no product integrity issue. Its data and research shows the following potential impacts.

Liberia: Agricultural products are the primary exports of Liberia. Currently, they are one of the largest global producers of palm oil and palm kernel oil, which is the primary concern. Rubber, another large export product, is primarily consumed by tires. However, there are some ancillary lab products that could contain rubber. In both of these cases, the palm and rubber plantations have taken precautions to ensure a safe and consistent supply.

Below are the life science raw materials that could be impacted by shortages of palm oil /palm kernel oil, crude oil and rubber:

Palm oil & palm kernel oil

  • Polysorbates
  • Stearates
  • Sodium caprylate
  • Glycerol (byproduct of biodiesel production)
  • Propylene glycol monocaprylate

Rubber

  • Tubing
  • Stoppers
  • Other ancillary components (elastic, bands, etc..)

Ivory Coast: This area produces a majority of the global cocoa and a small percent of coffee output. Although the Ivory Coast in not in the immediate Ebola breakout area, the global market is still bracing itself for price increases for cocoa. However, coffee futures are mixed at this point. As a piece of trivia for most, cocoa and coffee are important to the life science supply chain in that caffeine, a compound derived from both materials and often used as a media component, could be impacted.

Other materials that could be impacted are mined materials, such as metals used in catalysts (gold, alumina, copper, etc.)

Demand shifts elsewhere: take the palm oil mentioned above for example – this resource is harvested in a relatively narrow band around the globe. See below image:

2006palm_oil

When African supply is impacted, demand concentrates elsewhere – as in Indonesia and Malaysia in this case. Wet weather has reduced output in Malaysia, the No. 1 producer this year, but thankfully there are significant stockpiles to hold companies over. Resilinc’s expert here tells us that life sciences don’t have as forward-looking contracting habits as other bulk consumers of the commodity and are liable to get cut out of readily available materials if supply changes.

Those were some of Resilinc’s experiences so far.

Humans change their behavior and they are risk averse: something we have seen here in the USA, for example this activity in NYC where LaGuardia workers went on strike. Energy firms like Exxon have seen their drilling operations in the area curtailed.

The psychological effects lead to changed behavior in many ways:

  • Skilled workers – as well as seasonal farm hands – stay away from the region. This cripples farming operations, as well as higher skilled activities (mining, oil and gas, utilities, medical services, etc.) that rely on expats and resources with the financial means to quickly relocate.
  • We have also heard stories about rubber plantations where people simply don’t show up out of fear of contracting the illness.
  • European airlines (notably Air France) have gone on strike, perhaps not entirely because of Ebola (they just like to strike) but, in general, airlines and airports are impacted by Ebola.
  • Human refugees are fleeing Africa to Italy and primarily other Mediterranean countries who may not be subjected to routine screening as they cross into Europe.

Riskmethods chimed in with more information as well – and they have even developed an Instagram with some visuals that they would like to share. Personally, I think there is unwarranted optimism at the end of Riskmethods’ Instagram. Specifically the comment about "The bottom line here is we know how to stop it – CDC.”

I don't have that level of confidence in the CDC at all. I’m not talking about the people – I believe they are as competent as they come. The CDC as an agency is, however, subjected to political second-guessing and restrictions (blockades against certain countries, and forced quarantining of individuals are not PC these days, especially since this involves people of color, etc. – as tragically ironic as the end result becomes) and then there is ever-present general government ineptitude to deal with.

In other words, the affected areas and peoples in western Africa are probably doomed to have to live through this disease "burning" itself out. I wish I could be more optimistic, but no.

 

Further reading:

All Spend Matters Ebola articles…

Voices (3)

  1. David Hardman:

    With hundreds, if not thousands, of people getting seriously ill (and sadly, many dying), entire economies are getting upset. When people are afraid to go to work because they are worried about getting sick a country cannot function. If a country’s workforce slows down everything they output crawls to a halt as well.

  2. Thomas Kase:

    Thanks for the comments.

    About Nigeria – well, there is such a thing as a publishing cycle – it takes time – I wrote this prior to the Nigeria announcement. We can’t really tweet our updates from the streets of West Africa.

    Africa’s supply chain significance – you’re actually stating my case, although being rather sneaky with your partial quotes. Here’s what I actually wrote: “despite our initial assessment that the impact on corporate supply chains would be minimal (considering the relatively small presence of African products in the global marketplace) some verticals are actually quite exposed.” And then I reported on some of the exposed verticals. Read it again.

    By the way, woe betide the growth regions of Sub-Saharan Africa if China pulls out.​.. not enough is written about China’s influence in the region – unrestrained as they are without pesky FCPA and similar laws to contend with.

    ​My disdain for CDC management appears warranted – much hay was made in media over Tom Frieden, the CDC director, and his confusing messages:
    http://www.bostonherald.com/news_opinion/local_coverage/2014/10/flip_flopping_health_officials_spread_ebola_confusion
    Flip-flopping and confusion per the Boston Herald, which also states that Dr. Ashish Jha, the director of Harvard’s Global Health Institute said: “We need an adult in the room at this hospital to handle this situation” which clearly was meant to point out that the CDC director isn’t up to the task.

    About banning travel – some African countries themselves did just that. But, as I said in my piece, we’re often too PC to get to the underlying issue, and instead we get caught up in labelling sideshows.​ Your comments underline exactly this mindset. Well, Ebola is colorblind. And now we have a case in the NYC/NJ area which has been with mandatory quarantine – but not initiated by the CDC, but by local government. So I think my CDC leadership statement still stands.

  3. Philip:

    I won’t say that this is a terrible piece of writing, but:

    -Nigeria was declared Ebola free before this was published
    -You stated that African products represent a relatively small presence in the global marketplace, then cite cocoa & rubber as two globally-dominant exports of the affected region
    -Then close by expressing disdain for the CDC because it won’t lock people up based on their skin colour

    I’ll applaud Spend Matters for creating a forum where a variety of opinions can be shared, but this one doesn’t fit your mould.

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