How quickly can a supply chain be impacted by a pandemic? If the global supply chain was already under pressure due to the trade war between the United States and China, with the COVID-19 pandemic the challenges have become greater.
Despite global supply chains being robust and more resilient, if a disruption occurs, it will occur with little or no warning and the impact will be felt by everyone in some way. Much of this impact, according to the Harvard Business Review, is due to deficiencies in old supply strategies that could have been corrected years ago.
Data shows that global production is falling, and the impact of the coronavirus has not yet been quantified, but research from the Institute for Supply Management says companies are expected to experience a long recovery, with much longer delivery times due to shortages of parts and raw materials, as well as logistical problems.
Lessons in times of crisis
Typically, after disasters, companies learn to recognize – or should learn to recognize – the weaknesses in their supply chains, especially with regard to second- and third-tier suppliers in the affected regions. However, over time, this lesson is forgotten and, once again, companies struggle to effectively visualize and manage their suppliers’ suppliers.
This is even more complicated when supply options are limited to a few companies or a specific region. Brazilian companies, for example, that buy Chinese products or supplies because of the low price. Many were already facing problems even before the coronavirus paralyzed Brazil. And this impact is not only at the end of the supply chain, the one that buys Chinese supplies, but also at the other end, at companies that depend on these suppliers to work.
Thus, a risk management approach must necessarily consider both tiers 1 and 2 of your supply chains, but it must also at least understand the risks related to suppliers beyond tier 2.
Efficient management
Despite being robust, the supply chain can present weaknesses because it involves many interdependent companies. By its very nature, it becomes vulnerable to problems, such as the one faced with the coronavirus.
In these cases, the Purchasing department needs to optimize its supplier management with new data sources and approaches that allow it to understand how to reduce potential risks. According to the Harvard Business Review, global supplier monitoring needs to be carried out 24/XNUMX, with the help of new technologies such as artificial intelligence (AI) and natural language processing.
Companies that invest in intelligence are able to quickly predict how their supply chain may be affected and which products will be impacted. This gives them time to seek new prevention strategies.
This proactivity obviously has costs, but the advantages of being able to quickly seek out other suppliers justify the investment in mapping and active monitoring of the supply chain. For example, companies that map and monitor their supply chain would have been aware of the inputs coming from Wuhan and Hubei since the beginning of the crisis and could have sought emergency options to avoid the shutdown of their operations.
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