As the world struggles with the health implications of the coronavirus epidemic, business issues are also manifesting themselves. Globalization makes people highly portable across borders, but supply chains are far more global in their nature than the movement of people. In the case of China, this is not surprising. The country now has a $14 trillion economy, quadruple what it was in 2003.
Earlier this week, Hyundai Motor Co. announced it was suspending vehicle manufacturing in South Korea for three days due to disruptions in its Chinese supply chain. And Apple’s stock is off more than 5% from late January’s all-time high as the epidemic has raised concerns about its Chinese supply chain.
A recent Gartner Group study outlined the dangers and best practices for dealing with potential disruptions to global supply chains originating in China from the coronavirus. According to the author, Sarah Hippold: “As the coronavirus outbreak spreads rapidly and exceeds the SARS outbreak in 2003, supply-chain leaders must mitigate instant disruption and plan for future incidents. … Although the outbreak is being compared to the 2003 SARS outbreak, China is now much more developed and integrated with the global economy, and the country has significantly improved its transportation networks. This means the supply-chain implications go beyond regional concerns.”
What should companies do to prepare their supply chains for disruption? The Gartner report offer several recommendations:
Short term. Develop a plan for increasing supply-chain transparency in high-risk countries affected by the virus.
Medium term. Balance supply and demand and build buffer stock, as well as diversify the supplier ecosystem in other countries.
Long term. Plan and prepare for future disruptions, avoiding locating high-value nodes of manufacturing for key components in single countries or regions.
Adjusting in the face of disruptions to account for potential pandemics means adjusting just-in-time manufacturing and lean management processes to provide buffers and the ability to manage the change more efficiently and creatively than competitors.
Isaac Cheifetz is an executive recruiter and strategic résumé consultant based in the Twin Cities. His website is catalytic1.com.