Gartner: how supply chains can mitigate coronavirus impact
The spread of the coronavirus is impacting individuals and supply chains alike, with hundreds of new cases announced every day.
It’s a public health emergency and has caused product flows to be changed around. The research and advisory giants, Gartner, believes supply chain leaders should focus on three main areas to mitigate disruption from the coronavirus.
”As COVID-19 spreads globally, we are seeing increased supply chain disruption, but also changes in consumer spending habits,” commented Sarah Watt, senior director analyst with the Gartner Supply Chain practice. “Supply has been impacted in three primary ways: limited access to employees due to quarantines, factory closures or manufacturing slowdowns and limited access to logistics to move goods. Most supply chain organisations are in crisis management, assessing impacts and response on a daily, if not hourly basis.”
Impact Area 1: Workforce
In a bid to limit the impact of coronavirus and provide a degree of risk management, the government has advised employees to stay at home. This has made employers put measures in place around travel and site visitors. In the case of factories, it has resulted in goods not being produced and subsequently exported to dependent markets and other factories. “As the virus extends globally, supply chain leaders need to think about how to protect the health of workers, and support individuals who are ill. Providing clear and consistent communication through human resources and travel security is essential,” added Watt. “As this crisis is ongoing, the risk is that crisis management teams become fatigued and make poor decisions.”
Impact Area 2: Products
The virus could transform the competitive landscape. Suppliers for commoditised products are at risk to lose market share, as clients will look into substitute suppliers when they don’t receive goods on time. It is thought that products associated with brand loyalty will be less impacted because customers are more willing to wait.
When pushed to make trade-off decisions, supply chain managers must analyse and forecast the impact of the coronavirus on customer demand and product availability. Companies’ business processes are required to reassess their goods and services in order to mitigate the effects of the deadly virus. “Supply chain organisations need to frequently reassess their supply and demand plans based on the evolution of the virus and consumer sentiment,” said Ms. Watt. “Supply chains may also experience sharp increases in demand for products or unexpected consequences from the event, such as panic buying for essential items.”
Impact Area 3: Costs
There has been a considerable impact to organisations with increased costs of shipping, as well as a concern of companies meeting their financial objectives. If there are any additional costs incurred due to the coronavirus, it should be attributed to the entire organisation rather than individual departments. This will make it easier to assess the costs against organisations ability to achieve its strategic objectives and manage stakeholder expectations.
“It’s also a good idea to sit together with the legal department and analyse all supplier contracts,” concluded Watt. “When the time renewal comes, make sure that the organisation is financially protected against similar situations that might occur in the future. Supply chains will not be the same after this event. There will be an increased focus on resilience, risk exposure and business continuity plans going forward.”
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