Covid-19 – Affecting Your Supply Chain?

The whole world is fixated on Covid-19. Perhaps too much so due to its unpredictability. There’s so much we don’t know. What we do know is that it is very contagious, it has a relatively low fatality rate, and, if left to its devices, lasts about 3 weeks.  It seems to be slowly coming under control in China. However, the panic and rumors are now intensifying in the US and Europe.

We have monitored this situation very closely because our whole China office is affected.  We are happy to report that all our employees are safe and healthy and that they are working diligently to reduce the impact of disruption on our clients.  Perhaps surprisingly, communications with suppliers has been excellent and nearly uninterrupted, and they have been able to keep our clients in close contacts with their factories.

Despite this, disruption is inevitable. The whole world is affected by uncertainty, which in a sense is a great equalizer. And while importers will be impacted significantly as well, those that are able to accurately understand their supply situation, and those who can predict actual delivery times, will have a leg-up on the others.

One of the most obvious casualties of the virus is travel. This has become such an important issue, in fact, that we will cover it in a separate blog. So, stay tuned.

In the meantime, we’d like to review the current impact of this virus on the world:

Delays: While most multinationals rely heavily on their mainland supply chains and trust in their reliability, they have been caught by surprise with the disruption in manufacturing and have been left with few options for keeping up with demand.

Risk Assessment: Because the China supply chain has been so efficient in the past, many companies have been caught wrong-footed by this unexpected event. Lulled by years of predictable performance, many importers may not have sufficient redundancies in place or proper strategies to mitigate the risks of this disruption in the global supply chain, leaving them exposed and vulnerable.

Economic Impact: With fewer shipments leaving from the Chinese docks each and every day, it is increasingly clearer that the world’s economy will inevitably be impacted for months to come. Maybe even years. Larger corporations that have experienced faster turnaround due to their buying power, and rely on just-in-time deliveries, are feeling the impact of the virus perhaps even more seriously than their smaller counterparts.

Business as usual?: Not really. At least “not yet.” Some manufacturing facilities have temporarily shut down because workers cannot come to work. Many workers must self-quarantine for 14 days, while other regions were completely quarantined as a safety measure. Different parts of China have experienced a different impact, but because they tend to be interconnected, the industrial impact is similar all over. Some provinces have returned to “business as usual” fairly quickly while others, like Wuhan, a huge industrial center and the epicenter of the outbreak, have been slower to recover.  But recover they must, and they are working hard to get there.

In the coming weeks, we will dive deeper into what life is like in China as it recovers from this “black swan” event, what major impacts Covid-19 is likely to have, and what you can do to prepare and reduce the effects of the virus on your business for a happy and healthy supply chain.

By Jocelyn Trigueros