Coronavirus – Planning, Preparedness and Proactive Actions

No matter how vested we are in predictive analytics and risk management, there are some events, like the devastating Coronavirus outbreak, that simply cannot be foreseen. Humanitarian crisis aside, the procurement world is hearing news of critical product shortages and tech company share prices hit hard by government restrictions (The FT). Taiwan’s Hon Hai Precision Industry, for example, known as Foxconn, which makes the majority of the world’s iPhones, suffered its biggest share price fall in 20 years, and other electronics parts makers and tech groups, with exposure to China, have been hit hard too.

On Friday, as we learnt more about extended closures of plants and ensuing supply shortages, we listened to a webex hosted by supply chain management experts Resilinc. It was a special report conference about the latest developments and their effect across the global supply chain. Bindiya Vakil, Founder & CEO of Resilinc, gave an interesting and informed talk about what we know and what firms need to be thinking about to help avoid supply chain disruption as much as possible.

She reminded us of the disruption at a humanitarian level too, not just to the supply chain. With 50 cities in shut down, maybe up to February 11 at the moment, shortage of essential goods and supplies in the lockdown areas might affect patient recovery rates. Hospital gowns, or protection wear for first responders, for example, are already in short supply owing to a storage issue which led to sterilisation issues, this is now impacted further causing some surgeries to be delayed.

Patient recovery rates are key: once they get published we see bans lifted. If we consider it can take many months for vaccines to be developed, which then have to be distributed and administered, we might be looking at over 12 months of disruption. But we are confident the Chinese government can scale such a vaccine deployment quickly, so that should only be a worst case scenario (one company says it may have clinical trials on a coronavirus vaccine within three months, it has been reported).

When any region gets cut off, the global supply chain will suffer. It’s our job, she said, as procurement professionals to make sure we keep supplies moving. Of course Wuhan is a major transportation and manufacturing hub – from semiconductors to bio-tech – in fact, half the Fortune 500s are in the affected region, but with many flights and ports shut down, we could feel the effects for several weeks after the estimated February 11 re-opening.

Resilinc uses its Discovery Data Ecosystem to map the many direct and sub-tier suppliers from all sectors. They have advised customers to triangulate who is connected to whom, so they know who is affected. Clearly that doesn’t help non customers, but many suppliers affected have estimated several weeks of impact even at this point.

She was clear that while Resilinc is not offering direct advice or predictions, it is important that you generate your own timelines and make your own judgements. We do know that February will be pretty disrupted, and they have advised their customers to plan for 3 to 6 months of disruption. More information on virus recovery rates will affect that.

She stressed the importance of investing in business continuity, because those with better foresight can act quickly. Firms that haven’t done this, she said, are most vulnerable. Some things are key:

  • Supply chain mapping – (although if you haven’t done this, now is not the time to start. This is something you need to do in times of non-disruption.)
  • Keep up communication with all stakeholders – your business and customers and suppliers. The worst thing you can do is keep them guessing. You need to tell them your plans as information unfolds. For example, if x conditions are met, these are the plans we will follow.
  • Know your inventory
  • Work out ‘what-if’ scenarios - what if closures go beyond February 11? What happens if it is March, or even April?

We also spoke briefly to Ian Nethercot, supply chain director at managed IT support and services provider Probrand, who writes a monthly column for Spend Matters on IT supply chain developments, and he echoed the advice for tech buyers:

‘‘While there’s nothing that can be done to avoid the situation, IT buyers need to be forward planning effectively for regular run rate purchases.

Communicating with your suppliers to ask the right questions is key. For example, when getting quoted lead times from your supplier, ask them if they have checked all the way up to the supply chain to ensure there are no constraint issues. Additionally, is the stock you are waiting for already in transit or is it still in the factory in China? This will give you a better idea of lead times and possible delays. And consider, it may be best to consider buying product that is actively in stock now.’’

Our Lead Analyst here at Spend Matters Europe, Magnus Bergfors, added:

“This outbreak, and the consequences of it, shows the importance of having visibility and control over your supply chain and not necessarily only you first-tier suppliers. And listening to the experts it seems like we unfortunately will see more of these types of horrific events that will impact our increasingly complex and sensitive supply chains. So if you are in the manufacturing space and haven’t invested in supply chain visibility and risk management capabilities, now is the time!”

 

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