March 2020
How to protect your supply chain from the Coronavirus
Whether you are an experienced exporter or a complete novice, understanding what supply chains are - and how they affect your business - is a key component of your success. In order to effectively promote, track and grow your product line - especially in the global market - you need to have a supply chain that is resilient, diversified and organized.
The recent coronavirus epidemic that began in the trade city of Wuhan, China and has since made an impact on a global scale, makes the establishment of a strong supply chain all the more necessary.
But what exactly are supply chains? How does a health crisis like the coronavirus affect them - and subsequently, you and your business? What can you do to mitigate the impact on your supply chains and maintain a thriving business despite a volatile market?
The good news is - there are answers to these questions.
SUPPLY CHAINS 101
If you’re a manufacturer or a wholesaler, you probably already know the basics of what a supply chain does. At its most basic level, a supply chain is a process by which a product is sourced, manufactured, delivered to wholesalers, and finally sold to a consumer via a retailer. What this means is that there are specific links to each step of the supply chain that affect both each other and the overall efficiency of the process. When one level is backlogged or delayed, the other links are also affected.
For example, materials for a product are sourced and gathered before they go to the manufacturer. The manufacturer then produces the products with those materials and starts the process of delivering the inventory to various wholesalers. A wholesaler is responsible for tracking and distributing inventory to the retailer, who in turn delivers the products to the consumer. A delay or external factor prohibiting the initial sourcing of the raw materials, for example, affects the manufacturer’s efficiency and productivity. This scenario can be repeated and applied to any step of the supply chain.
CHALLENGES IN SUPPLY CHAIN MANAGEMENT
Public health crises aside, proper management is vital to an efficient supply chain. Lack of communication, insufficient inventory software, and mismanaged product sales expectations all pose challenges to supply chain management. When compounded with a health epidemic like the coronavirus, the impact of these challenges is more apparent.
HOW THE CORONAVIRUS AFFECT SUPPLY CHAINS
The coronavirus, known as COVID-19, originated in the Chinese city of Wuhan. The virus began to spread across that area of the country and has since made an impact globally. Symptoms include fever and lower respiratory problems, like a cough. One of the issues is that the incubation period is anywhere between 2-18 days, so people may be infected and not yet be symptomatic.
COVID-19 can affect supply chains in several ways, but primarily through staff reduction and delays in air, boat or other cargo freight. Staff reduction is already an issue following the extension of the annual Lunar New Year celebration, which normally halts production in warehouses across the country for at least a week. This year, the holiday was extended by several weeks, and even once warehouses reopen for business, illness and quarantine conditions could prevent staff from returning to work. Decreased productivity is a result.
Similarly, quarantine recommendations combined with lower staff numbers can create delays in air and cargo freight. If cargo is already delayed due to the Lunar New Year, it’s likely that the backlog will be exponentially increased by the concerns surrounding the coronavirus in China, the home of a large number of warehouses and manufacturers.
Supply Chain SOLUTIONS
It’s natural to be concerned about the impact the coronavirus might have on your established supply chains and subsequently your bottom line. However, there are ways you can mitigate the impact.
If you work with suppliers and manufacturers in impacted areas, maintain communication with the teams on the ground. Get a firsthand view of what’s going on from their perspective, and adjust accordingly.
Take steps to establish and/or strengthen diversity in your supply chain. Greater diversification means less reliance on specific locations. In turn, therefore there should be a less potential impact if a supplier is unable to fulfill their duties due to illness or a mandatory shutdown. In this instance, proper and efficient management of inventory in unaffected areas is necessary.
Finally, communicate expectations at every stage of the supply chain. Realistic expectations help everyone in the process - from the parts supplier to the consumer - feel valued, understood and included.
Have more questions?
At JF Moran, we want you to feel prepared and supported regardless of what happens with the Coronavirus. Do you have questions on how we can help you diversify your supply chain? Want advice on the most up-to-date software to track and manage everything from inventory to staff? Give us a call today. It’s our goal to provide you with the resources and knowledge to give you and your business confidence even in the midst of a tumultuous time in supply chain management.