Ensuring Supply Chain Integrity in times of Pandemics
Every Country is now much more developed and integrated with the global economy and has significantly improved their supply chain networks. In a global economy, virtually every organization is connected to or dependent upon others. This means the supply chain implications go beyond regional concerns. Travel restrictions, shortages in labor and materials, as well as logistical challenges through tightened controls, and hub and border closures will cascade and augment the impact much further today than it did some years ago.
The possibility of a pandemic has the potential to disrupt workforces, supply chains and economic activity. Understanding the dependence on entities outside the organization is critical. It is with a sense of urgency that prudent organizations review and update their business continuity plans to insure their operational resiliency.
How Pandemics impact Supply Chains
Though it is difficult to measure the exact impact of pandemics on supply chains, organizations must have a holistic view as to how emergence of such pandemics might disrupt operations.
Supply shortages of materials or finished goods coming from or routed through logistical hubs in impacted areas.
White and blue-collar employees may not be available due to quarantine guidelines, limited accessibility or illness.
Travel restrictions limiting the ability to discover, qualify and certify new business or programs and to transact business.
Established hubs and supply networks may experience limitations and finding alternative routes and means of transportation may be difficult
Consumers may be more cautious in their purchasing habits due to fears about being in public and potential exposure and may turn to online purchasing.
Partial or Complete lock down (Restricting business, closing stores etc.) which may affect movement of people and goods across geographies
Business continuity planning for a pandemic:
In order to mitigate the effects of disruptions that may be caused due to a pandemic, it is essential to have a robust business continuity plan in place.
To protect your operations and ensure continuity of services or products to your customers, it is important that you:
- Map dependencies to understand where disruptions might impact the value chain
- Review the preparedness of critical third parties (suppliers, vendors, service providers)
- Identify single points of failure in the ecosystem
Business continuity plan must include 4 elements:
Risk Management Plan:
Risk management plan for a pandemic involves identifying risks, assessing the impact of risks and developing strategies to manage risks to the business.
Business Impact Analysis:
This assesses how risks might affect business operations. It identifies activities that are critical for the survival of the business and prioritizes what must be done to maintain them.
Incident Response Plan:
It outlines actions to limit the loss of life, property and business, before, during and immediately after a pandemic.
It aims to shorten recovery time and minimize business losses. It sets time frames for resumption of usual business operations.
Mitigating Supply chain disruptions
With high-level considerations such as the jurisdiction and criticality of supply chain links and diligence to further understand risk, enterprises can start building the foundation for a dynamic supply chain in order to counteract possible disruptions.
- Create contingency plans: Organizations should Start with scenario-planning strategies. While different organizations face unique risks, companies should develop plans for both optimistic and conservative situations
- Mitigate supply shock: Companies should work with their existing suppliers to create a business continuity plan. Businesses should identify suppliers in different regions to diversify supply chain and safeguard against shortages, especially for products with longer supply cycles.
- Manage demand volatility: Manage panic buying situations while taking on a responsible roles in the supply chain ecosystems
- Make work safe: Invest in protective gear for supply-chain workers and communicate via apps to manage time, availability and safety
Supply-chain managers know the risks of single sourcing, but they do it anyway in order to secure their supply or meet a cost target. Therefore, many are facing a supply crisis that stems from weaknesses in their sourcing strategies that could have been corrected years ago.
In the recent times of Coronavirus pandemic, many firms are trying to redesign their supply chain as most of the firms have high dependencies on China for sourcing and supplies. In the first few weeks of January 2020, companies that had mapped their supply chain already knew which parts and raw materials were originating in the Wuhan and Hubei areas and, as a result, could bypass the frantic hunt for information and fast-track their responses.
A practical approach to managing sourcing risk is:
- Use revenue impact and risk of supply chain disruptions to prioritize supply-chain-resiliency measures.
- Monitor suppliers 24/7.
- Source from two suppliers (75%–25%) rather than one.
- Map suppliers’ manufacturing, warehouse, and distribution sites to ensure they are not all in the same region.
- Identify the Tier 2 suppliers that Tier 1 suppliers use for critical parts or materials.
- Buy insurance to cover profits lost from a disruptive event at critical suppliers’ sites.
Major firms in India are developing their business continuity plans to address any potential Contingencies. They have set up core contingency management team for all its businesses so that operations are not disrupted and to ensure supply in the market.
Some Companies are spending their time and resources on extensively mapping their supply chains. Mapping involves engaging suppliers to understand their global sites and subcontractors, as well as knowing which parts originate or pass through those sites.
The world is getting smaller and more complicated, raising new, previously incomprehensible risk to commercial enterprises. Nevertheless, any pandemics or other crisis provide an opportunity to better prepare for the next challenge. Developing a dynamic supply chain, supported by commensurate, targeted due diligence and monitoring, will give an enterprise an edge on disruption and the competition alike.