What to Do if Your Supply Chain Has Been Interrupted
Caixin China’s Manufacturing Purchasing Manager’s Index (PMI) has just recorded the lowest numbers since survey inception in 2004. February’s numbers were lower than 2008’s great recession. A value above 50 shows a trajectory of growth, whereas a valuation below 50 indicates retraction. Last month’s PMI was 40.3, largely due to the Chinese manufacturing operations remaining closed in attempts to stifle the outbreak of COVID-19.
What now? Impending supply chain disruptions can be properly mitigated by partnering with an international transportation management team to optimize your entire supply chain strategy, by compiling a list of every supplier ever used, designing appropriate backup implementation, and diversifying risk by sourcing locally.
The coronavirus has already begun to directly impact India and massive manufacturing industries there within. “We are getting charter inquiries every day and I would expect that to double over the next couple of weeks. I fear that in the next 10 days or two weeks, [we will be witnessing] the fastest air freight peak ever seen.” [Source]
Optimize Your Entire Supply Chain Strategy
If your current supply chain strategy has a weak design, you may be missing out on key indicators and components worthy of mitigating unforeseen risk (like viral outbreaks) and streamlining your operational sectors without missing a beat.
The typical issue here is that most global supply chains lack the structural strategies to account for major disruptions, leaving a gaping whole and halted production in the wake of a crisis. And let’s be honest here, typical supply chain strategies are not going to cut it in today’s volatile market of Brexit deals, trade wars, and coronaviruses.
A new innovative design must be integrated into your supply chain if you expect to continue any type of year over year growth and predictive profitability when the trajectory and current complexities revolving around global trade of any kind are rightfully taken into consideration. Your supply chain, like any other aspect of business, must adapt and evolve with the times. To refuse change is to accept failure.
So, the question remains – if you agree to make the necessary changes in direct proactive response to policies, disruptive nuances, and adaptive supply and demand dynamics, then where do you begin?
Answer: Suppliers. ALL suppliers.
Suppliers: Who Supplies Your Suppliers?
This knowledge is critical to mitigate risk and crisis aversion to both diversify threats and limit exposure. If you fail to thoroughly understand the layers of suppliers involved in your entire supply chain, then that lack of knowledge could prove to be perilous in nature and detrimental to the longevity of your business. Revert back to the 2011 Sendai earthquake that quite literally shook Japan. Some companies were vulnerable for weeks because they were unaware of their actual exposure due to their inherent unfamiliarity of their upstream suppliers. This is an easy mistake to correct – ensure that you are making the necessary adjustments.
Diversifying your immediate risk is mandatory to surviving a global crisis on any scale. Where are your vulnerabilities? Do you have comprehensive contingency plans that would allow for business as usual, regardless of outer influences or circumstances? Do you have employee continuity plans – what happens if employees are unable to work for large periods of time? Is the answer more automation, software, or built in remote work?
What is Your Company’s Plan B?
This could be tied in to the business supply chain strategy and planning piece from above. Does your sourcing, fulfillment, operational sector, and distribution channels all have capable backup plans? If one leg of your supply chain breaks off how will you continue distribution to customers?
Having the answer to these questions are vital to the forecasted efficiency and continued success of your business plan. Scalability, after all, must account for heightened issues that could derail current work flow and production – this is the continued growth factor too commonly overlooked.
Plan B is also where a knowledgeable international transportation management team of experts could assist in solutions driven possibilities regarding complex issues most companies never even knew could be an issue. This takes your company from highly vulnerable to recession proof, virus proof, and trade war proof.
You Know What They Say: Buy Local
This not only goes for small town consumers supporting the local businesses in their historic downtown blocks – this also goes for the conglomerate entities sourcing from other large entities out of equally powerful countries. Enter, COVID-19. What do you do now?
Answer: Restructure your supply chain to source products from local manufacturing facilities.
While this may seem overly simplified, the act of local sourcing allows for another avenue of risk diversification. The thinner you can spread your overall risk, the less invasive any of it will be to the bottom line and future of your company.
While the cost to receive product from local channels may initially be higher, the transportation will be much lower – not to mention the channel will remain open during any other global catastrophe or issues negatively impacting international business as we know it.
Conclusion
While we may not know the direct impact or severity the coronavirus will ultimately have on the import and export of international trade, we can see the immediate issues rising as a result today. It is important to be proactive, not reactive. One mitigates risk appropriately and continues on with business while utilizing and implementing contingency plans, as the other shuffles to maintain any resemblance of composure to keep their head above water. Which company do you want to be?
CLN takes pride in being a solutions driven team of experts who help clients navigate the waters of complex logistics and supply chain issues. If you have any concerns about how the coronavirus is or may impact your business please feel free to reach out to us HERE today for a free consultation. We will gladly discuss possible options, scenarios, and viable solutions that your company could take action on today for near immediate results.
The coronavirus is a lesson in risk management across your entire supply chain. CLN will help you navigate the nuances of risk management with the appropriate amount of quick response assertiveness. We look forward to working with you.
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