In a matter of mere months, the global pandemic has radically transformed the way we do business. That is particularly true of companies that manufacture the products that people use every day. Understanding this turnabout can help you to gauge the short-term consequences of COVID-19 as they pertain to your operations as well as assist you in planning for the extended future.
As of January 2020, over 40 percent of the Global Fortune 500 companies had a major presence in Wuhan, China, the place where COVID-19 originated. They as well as many smaller operations experienced an immediate and often catastrophic interruption in their supply chains because of this dependence. For many businesses, Chinese suppliers were their only source of the raw materials they needed.
If your enterprise falls into this category, there are steps you can take to reduce the severe impact of supply chain interruptions on your survival:
- Pay attention to the health of your labor force, arriving at contingency plans in case of employee illness;
- Whenever possible, reduce your Tier one supplier presence by diversifying the sources of your raw materials;
- Update your inventory scope and policies to reflect changes in sourcing;
- Anticipate manufacturing plant closures, and arrive at practical contingency plans;
- Speak with suppliers, demonstrating your willingness to be agile in scheduling production;
- Use the bill of materials that you employ with current suppliers as a framework when exploring alternative options. This tool allows you to quickly purchase and compare all of the items of your BOM.
While these strategies are not foolproof, they will go a long way toward protecting your business’s immediate viability during the height of the pandemic.
Solutions for the Longer Term
The good news is that technology is arriving on the supply chain and manufacturing scene that will drastically reduce companies’ vulnerability to unpredictable conditions such as were experienced in early 2020. For instance, digital supply networks (DSNs) are allowing companies to leave linear supply chains behind in favor of networks that provide end-to-end visibility and easy collaboration with all members of the team. These technologies use cutting-edge innovations such as 5G, robotics, the Internet of Things and artificial intelligence to assist companies like yours in anticipating and meeting challenges, including unexpected hurdles such as health crises, regulatory changes, terrorism or supplier bankruptcy.
There are additional measures that all companies should take right now to protect their current and future interests. They include the following:
- Identify your vulnerabilities by thoroughly mapping your complete supply chain. This involves going beyond primary suppliers and should also include transportation hubs and distribution facilities as well;
- Categorize suppliers by risk level. If you are an electronics company, chances are good that some of your raw materials can only be obtained from specialized providers in Asia;
- Diversify suppliers if possible;
- If some of the materials you need are highly specialized, consider stockpiling large quantities as a proactive strategy.
Depending on what type of electronics products you are selling, you might be able to supplement your Chinese suppliers with others in the region. Increasingly, companies are relying on vendors headquartered in Vietnam, Thailand and Indonesia as backups should disruptions occur in China.
COVID-19 caught the world unawares, leaving manufacturers reeling and causing economies around the globe to plunge. While there was no way to predict the catastrophe, it has opened the eyes of many managers and prompted serious discussions about preventing similar blindsides in the future. When companies do all they can to diversify their supply chains and make communication among all components as seamless as possible, the impact of disruptions can be minimized.