By Dale Lawrence
Every company is impacted in some way by Coronavirus and in many organizations, their supply chain experienced great challenges. After decades of supply chain integration, the wave of countries going into quarantine illustrated how interconnected we all have become. In only a few weeks, organizations around the world quickly felt the impacts from shortages of spare parts, natural resource shipments, disrupted human capital, shifting human behavior and buying patterns, gaps in information and technology, customer orders in progress and outstanding payments.
While natural disasters often are seen in human cost and economic damage, another impact is the disruption in the supply chain. Some examples of how impactful disasters can be to supply chains:
• The Tohoku earthquake and tsunami (2011) disrupted car manufacturers in Japan, Europe, Canada and the United States. Just-In-Time (JIT) inventories, a core pillar of Lean manufacturing was especially impacted.
• Hurricane Florence (2018) hit North Carolina and caused damage to the port, warehouses and surrounding railroads resulting in delays to a number of supply chains.
• Hurricane Maria (2017) was especially damaging to the electrical grid and supply chain in Puerto Rico causing massive disruptions to medical supplies and logistics for delivering aid.
• While the Coronavirus pandemic supply chain impact is still being assessed, by early March (before North America saw the main economic effect) at least $50B (Source: United Nations Conference on Trade And Development) in reduced exports had occurred. This will be a fraction of the full damage to global supply chains.
How Can a Company Mitigate Risk of a Massive Supply Chain Disruption?
Implement Your Supply Chain Recovery Plan. This includes an Impact Analysis (identify issues and exposure) that:
• reviews insurance policies;
• assesses detectable metrics and look for non-detectable ones;
• examines supplier and customer dependencies;
• evaluates any disaster recovery tactics and business continuity options.
This should outline ownership of each activity and actions to ensure fast and effective resolutions. A good recovery plan is built to ensure a flexible approach to quickly solve problems. Each action should align to reliable metrics that are detectable and measurable, especially if technology is disrupted (e.g. power failure, earthquake etc.). I personally like to use a pFMEA (Process Failure Mode and Effects Analysis) to align the team around a rapid tool.
Partner with your Suppliers and align Supply Chain contingency plans. By coordinating strategies, you not only ensure your bases are covered but your suppliers have the confidence they are able to work well with your company as well. Designing a scorecard will help all parties have confidence in the unified risk management.
This is especially important with supply chains that cross multiple countries as noted by the initial impacts in China (the initial region hit by the Coronavirus). Very quickly, factories slowed output and container volume from Shanghai had an impact, especially in Japan, Europe and North America. A serious supply problem with PPE (Personal Protection Equipment) and many Pharmaceutical components that are manufactured in China caused shortages in Europe and North America as they were confronted with Coronavirus as well.
Assess impacts to the organization’s brand, consumer confidence and reputation. When a major impact occurs, it is important that your customers have confidence in your ability to fulfill supply in times of trouble. This is especially true if the disaster has a longer duration as your customers may develop new relationships with your competitors. In the age of social media, reputations are quickly built or lost.
Move fast but have the right information. As your organization implements your recovery plan, leverage your trusted data points to monitor the effectiveness of any contingency plans.