Opus9 Blog

What Impact Does The Coronavirus Have On Supply Chains?

coronavirus-blog-headerThe death toll from the coronavirus has now passed 1,100, and its impact is being felt around the world. Cruise ship occupants are being quarantined off the coast of Japan, nine people have been diagnosed in the U.K., and even the Mobile World Congress in Spain was cancelled. 

How does this affect businesses in the U.S.? 

Unfortunately, the answer is that it has a significant impact. Because so many are ill, especially in a place like China that supplies many components to companies around the world, the supply of a variety of items is being disrupted. 

Here’s how it’s impacting the U.S. right now.

Supply in the Auto Industry

A lot of automotive parts are made overseas, and those supplies are currently being slowed. Chinese factories that were already closed for the Lunar New Year haven’t reopened, with over 45,000 coronavirus cases already diagnosed – most in mainland China. 

Even if carmakers have access to 99% of their needed parts, they can’t make a car. And the problem is compounded when auto parts makers in the U.S. rely on Chinese factories for components. 

One missing part stops an assembly line – and that’s exactly what we’re seeing with auto factories in the U.S. Many auto companies are already fighting slow sales and lower profitability, so the coronavirus supply issues are yet another damaging hurdle. 

Other U.S. Industries Impacted

Besides auto makers, there are a variety of industries that rely on Chinese components for manufacturing. The computer industry, electrical suppliers, and transportation sectors are all at risk.

This is especially true for those who operate lean manufacturing and use just-in-time deliveries of parts. A lot of parts from China come in the cargo hold of passenger planes, and there simply aren’t passenger flights arriving for obvious reasons. 

How to Protect Your Supply Chain

How can you protect your company’s supply chain from the impacts of the coronavirus?

There are two kinds of action to take – first, action to address immediate problems, and second, action that will prevent supply chain disruptions in the future.

Determine Likely Impacts

In the immediate term, determine the likelihood that your business will be impacted. Who supplies the parts you need, or the goods you sell? Where do they get their supplies? 

Trace your sources as far as you can down the chain. Remember, even a missing bolt can idle an assembly line. If you don’t have transparency in your supply chain yet, this is a great time to create it.

Once you have a full picture of how your business is supplied, and from where, you’ll know how likely you are to be impacted by the coronavirus.

Move Inventory Closer to Your Site

If you have important goods or items that are not onsite, be sure to move them away from affected areas as quickly as possible. Also, avoid having goods stored at logistical hubs that could be impacted.

The more you can get inventory into your buildings during an outbreak, the more control you’ll have over your business.

Diversify Your Suppliers

Having an exclusive contract may help you lock in a lower payment rate, but is it worth it if that supplier is disrupted? It doesn’t take a disease outbreak to put you at risk – financial or legal turmoil can impact any single business.

Instead, create contracts that allow you to diversify who and where you get supplies from. Do your research – it doesn’t help to diversify your primary sources if they all get supplies from the same secondary sources.

Plan Ahead For Future Disruptions

You never know when a national or worldwide issue will happen that impacts your supply chain. The more diverse you can make your input sources, the better. Also, be sure you fully understand all your sources so that you can accurately predict the impact of future problems.

Planning ahead is the best defense.

Feb 14 | Posted by Opus9