The outbreak of coronavirus (COVID-19) is a severe blow to supply chains. For businesses with global sourcing there are certain questions emerging:
- How to mitigate risks for the future?
- Is it a good idea to have more suppliers?
- Should preference be given to local or nearshore sourcing?
- How much inventory should be stocked so as to survive any future crisis without major difficulties?
The pandemic has disrupted global supply chains in a similar way to what happens in the case of major earthquakes or tsunamis, according to the Wharton business school of the University of Pennsylvania.
Medical supplies
The main priority, of course, remains the provision of medical supplies. Medical devices, masks, screeners, disinfectants: all these items are vital in order to provide care for people. For example, even with social distancing, the peak demand in the US for testing kits is estimated at some six million. Distributing those testing kits to the right locations is a major challenge.
Lessons from the past
The earthquake/tsunami in Japan back in 2011 can be compared to the coronavirus in terms of the extent of disruption to supply chains. Both natural disasters have in common their global impact.
So how to mitigate risks? After the tsunami, companies like Cisco and Boeing invested in supply chain risk management, so they are now better able to understand the consequences of similar disasters. Thus today the methodology is available and most big companies already have a supply chain risk management process.
-jk-