Tag Archives: epidemic

How to Manage Supply Chain Risks From the Coronavirus Outbreak

Are you being proactive in managing risks to your business from the coronavirus?

supply chain risks


The death toll from the coronavirus has reached more than 2,800 and the number of confirmed cases has exceeded 80,000. 

Beyond the enormous human toll, the effects of the coronavirus and the efforts to control its spread are being felt throughout the world’s supply chains. 

Factories in China are facing staff shortages. Or they are electing to remain closed to protect their workforce. Airlines have suspended flights to China. 

However, there is an indirect result of the necessary steps being taken to contain the outbreak. Restrictions and regulations designed to control the spread of the virus could have an adverse impact on cargo leaving and entering ports all over the world. 

Delayed Effects

And while some of the impacts have been immediate, other latent effects will not be felt for months.

This will hit:

  • manufacturers and retailers who rely on affected products and labour
  • logistics haulers expecting to transport the material
  • and, ultimately, the end consumers.

This crisis demonstrates the increasing complexity – and global nature – of supply chains and the imperative need to manage risk within this complex supply chain. 

Compare the current outbreak with that of SARS in 2003. It is striking to see how quickly coronavirus has eclipsed SARS in the number of infections. It took the coronavirus only 2 months to infect 75 per cent of the total number infected by SARS over a 9-month period. 

The crisis also shows how much China has developed in terms of population and establishing itself as a key cog in the world’s economy.

There is a danger of coronavirus becoming a major global issue if not controlled closely. So, what can organisations do to prepare themselves for these impacts?

Many leading organisations have developed programmes to manage and deal with supply chain disruption. But this situation is a unique challenge for even those organisations with advanced risk management programmes. 

Regardless of the level of sophistication in an organisation’s risk programme, all organisations can take steps to monitor their supply chain. This will help them to for the impacts of the epidemic.

3 Key Steps to Manage Risk

1. Know where your supply chain is located

Identify those countries that are currently at high risk and map your supply chain against these affected areas. This mapping should include evaluating key tier 2 and tier 3 suppliers as well as key logistics hubs that could be impacted.

2. Continuously monitor changes

Understand that the crisis is still unfolding and the true impacts from a supply chain disruption perspective may not reveal themselves for months. Establish a process to monitor other regions outside the infected areas that could be impacted.

Are ports outside the infected areas being impacted through disruption or through new regulations to protect against transmission of the virus? Are suppliers struggling financially without access to the Chinese markets, jeopardizing their viability?

3. Diversify the supply base

Like a financial portfolio, look for opportunities to rebalance and diversify the supply base to minimize the risk and take actions to qualify these suppliers in the event they are needed.

Need for Proactive Risk Management

This crisis underscores the need for organizations to establish and maintain effective proactive risk management programmes for their supply chain. 

It is impossible for organisations to anticipate these types of outbreaks. But an effective risk management programme, complete with processes, tools and data can lessen the impact. And the time it takes an organisation to recover.

Learn more about the challenges and steps necessary to build an effective and proactive Supplier Risk Management programme in this research “Integrated Risk Management: A Playbook for Procurement” from The Hackett Group.

How The Coronavirus Will Impact Your Supply Chain And What To Do About It

What key steps can you take limit the potential effects of the coronavirus on your organisation?


In China on 9 February the world received news it didn’t want to hear.

The number of confirmed deaths from the coronavirus has now overtaken that of the 2003 severe acute respiratory syndrome (SARS), with more than 1000 casualties. 

In addition to that, the virus is spreading at an alarming rate. There are now more than 40,000 confirmed cases. And this number is increasing as much as 20% every day.

While the virus is terrifying from a public health perspective, it’s also alarming in terms of your supply chain. Wuhan, China, the epicentre of the virus and now a city in total lockdown and complete disarray, is one of the world’s largest industrial hubs. 

Here’s how the coronavirus is affecting global supply chains – and what you can do about it. 

Production delays and factory closures

If you’re currently manufacturing anything in China, especially in the Wuhan area, you can expect significant production delays.

Fashion fit innovation company Alvanon, who manufacture dress forms in China, has issued a statement saying: 

‘We expect at least a four-week delay on physical goods that have already been paid for. Our factory is currently closed, and while we are doing all we can to minimize delays, we currently do not know when it will reopen.’ 

Currently, all public gatherings in Wuhan are forbidden. All factories and public places are closed. The flow of goods in and out of the area has come to a halt. 

Reduction in freighting capacity 

The coronavirus is now confirmed in more than 23 countries. And the world’s airlines are responding by cancelling flights to and from China. 

Airlines all over the world have ceased some or all of their China freight routes. 

Sea freighting is also likely to be affected. If you have goods in transport from China, there may be significant delays in them leaving major ports. And when they do leave, there’s a risk that crew will become ill on the journey. 

People movement

Freight is not the only thing that needs to come and go out of China. People also do, for business or leisure. 

The restrictions on flights will start to impact business agendas.

Many international companies are shutting down their offices in China and restricting all travel. 

Commodities market and the broader economy

From a supply chain perspective, what’s most concerning about the effect of the coronavirus is the already devastating impact it is having on the commodities market and the broader economy. 

As one of the world’s largest consumers of commodities, decreased demand in the Chinese market has now caused many commodity prices to slump. Copper has fallen 12% and crude oil 10%. The Bloomberg Commodity Index has taken a 6% hit. Analysts expect these decreases to continue.

Economists warn that the impact on the economy more broadly could also be dire. They believe that the fallout from the virus will be significantly worse than the SARS epidemic. 

The Chinese economy is much larger than it was then. But it’s also weaker, due to the continued US trade wars. 

China’s GDP growth is on track to slow (at least) in the first quarter, and analysts aren’t sure it will recover. This will, in turn, affect exchange rates and emerging markets. 

Developed economies are also expected to suffer. The downturn in Chinese tourism is expected to impact Australia’s economy to the tune of $1 billion.

What should you do? 

How can you manage the risk coronavirus represents for your organisation? 

Justin Crump, Procurious consultant CEO of Sibylline, a world-renowned risk management consultancy, recommends that procurement takes the following actions immediately.  

1. Understand cascading supply chain consequences

‘You need to understand more than just your suppliers,’ says Justin, ‘as it will be second-order problems that bite when you think you’re okay.’ 

To do this, Justin recommends you dig further to understand supplier dependencies.

A great way to do so might be to survey your suppliers. Test their exposure to the virus, and then try and mitigate any issues early. 

2. Stockpile if you can 

It might be too late for some, but Justin recommends that everyone who is able ‘tries to stockpile while you still can’. 

This is difficult for those practising just-in-time manufacturing.

But Justin thinks that if you can still action this advice you’ll benefit – as oil prices are substantially lower due to a steep fall in demand. 

3. Invest in resilience

Procurement should never be reactionary when it comes to risks, Justin reminds us. ‘But now, more than ever, you need to invest in resilience.’ 

Justin believes this ‘resilience’ needs to come in multiple forms.

For example:
• look into alternate suppliers – and move now to get ahead of your competitors
• consider impacts on staff, families and customer relationships 
• think long-term about how travel and freighting might be affected

4. Consider the bigger economic picture 

It’s tempting to focus on the now, Justin says. But it’s important to consider the bigger economic picture and how you might need to mitigate that risk (if that will even be possible). 

5. Appraise the effect on international relations

All large businesses depend on international relations to a degree Justin says, ‘so the effect on international relations shouldn’t be underestimated’. 

Justin thinks it’s important that we don’t rest on our laurels and just assume business will continue as usual.

‘What I see happening is that China is quietly blaming the US in some circles for the outbreak, calling it a deliberate attack,’ he says. ‘Likewise, the US is using this to encourage businesses to pull out of China. 

‘China blaming the US feels like more of an insurance policy to deflect criticism from the regime, but still . . . it’s a reminder that the global network is under threat.’ 

So bear in mind Justin’s analysis and consider taking these 5 steps to limit potential supply-chain difficulties resulting from the coronavirus. 

What effects are you seeing on your supply chain from the coronavirus? How are you managing risk? Tell us in the comments below. 

Interested in more hot tips on how to improve your supply chain approach and get more productive? Join the Procurious community of 37,000 members where you’ll find daily inspiration.