The impact of Covid 19 is there we all know. It is safe to say, at this point, society and the global economy, in a sense, will need to crawl before they walk, in order to get a handle on the ongoing and relentless impact of the coronavirus.
As the Coronavirus issue distracted everyone’s mind to it from other like major topics like Sports, Politics, Weather condition etc. And with that as a backdrop, the impact of the coronavirus on supply chain and logistics operations can very well be viewed as equal parts alarming, confusing, and staggering.
A computer & electronics products manufacturer said in the report that “coronavirus is wreaking havoc on the electronics industry. Companies are delayed in starting up production, which is resulting in longer lead times, constraints and increased pricing. It’s a mad dash to dual source stateside in case China isn’t back online soon.”
As companies try to understand the supply chain disruption due to the Coronavirus, the Hackett Group offers some insight.
If your company, or its key suppliers, carries limited raw material inventory and relies heavily on Asian sources of supply, you are at high risk of disruption.
Those industries that landed in the highest risk category include tools and hardware, electronics & appliances, auto parts OEM (Original Equipment Manufacturer), building products, diversified chemical, and industrial specialties.
While other industries will be affected, the telecom, automobile, computer peripherals, and industrial conglomerates have less inventory in their supply chain, the firms in these industries typically have the scale and resources to reduce supply chain risks.
Looking at past severe supply chain disruptions to find lessons learned, Hackett examined the group Fukushima nuclear disaster in 2011, During Fukashima, some companies discovered that they had a single point of failure in their supply chain. One example was Apple, which was using lithium-ion batteries that required polymers from a plant near Fukushima. Another example was the automobile companies, who could not get the oxygen sensors they needed for truck engines.
“This is critical because there can be hidden problems in the other tier suppliers that companies would not otherwise be aware of. Fortunately, tools for supply chain visibility have improved dramatically in the past few years, which makes it easier to address this issue,” explained Josh Nelson, Supply Chain Principal, The Hackett Group’s Strategy and Business Transformation Practice in the analysis.
Capacity is another area of concern. Even if there are multiple suppliers, they might not be able to fill the need. The analysis cites the example of travel bans and shutdowns, which would require companies to expedite shipments. And in other cases, these closures can lead to supply shortages.
“The best thing that companies can do is to simply know their supply chain risks, and preemptively develop mitigation approaches,” said Nelson.
“Those companies who identify specific supply risks and actively manage it, will find solutions or at least mitigate the impact,” says Nelson. “Those that don’t are at the mercy of the virus and the public response.”