Just after five days since our initial Supply Chain Matters commentary focusing on the impacts of the ongoing global coronavirus outbreak on China based and global supply chains, the containment, supply chain assessment and risk phases are ongoing.
Latest Overview
First, it is important to stress that the outbreak is both a global humanitarian as well as a supply chain related crisis. Our thoughts remain with all of the victims and their families.
As we pen this update, the latest reported numbers point to upwards of 20,000 cases reported in China alone, with deaths of at least 425 souls, most all of which were in mainland China. Multiple researchers and academics have indicated the real possibility that the outbreak numbers are far larger. Other indicate that the virus spread occurred as early as mid-December, which as often occurs, a far broader timeline of potential infection spread.
Containment Measures
The first priority remains that of containment. The government of China continues marshalling significant resources directed at both treating victims and containing the continued spread of the virus. State media has reported the added establishment of health emergency hospitals within the city of Wuhan and surrounding areas. Chinese and global wide health agencies are racing to determine the exact contagion rate of the virus and to whether it equates to rates seen in previous SARS or Swine Flu outbreaks of ten years ago. Such measures help to determine what the quarantine interval will be for people suspected of having or being exposed to the virus.
Many local governments throughout the country have increased restrictions on travel and movement of people. Many other global-wide countries have issued travel alerts or bans for citizens traveling to China, while the United States has formally declared a public health emergency in order to impose entry and exit restrictions.
Adjacent countries to China continue to respond with their own restriction measures.
The Nikkei news agency reported that Vietnam, and specifically the port city of Haiphong, has ordered companies and manufacturers to disclose the number of Chinese workers that could be returning from the Lunar New Year or Tet holiday period and to limit Chinese workers living in Hubei Province from returning, until the virus subsides. Likewise, Taiwan and Hong Kong are each considering bans involving travelers to and from China.
Potential Industry Supply Chains Impacted
Supply chain risk management technology provider Resilinc conducted a webcast on Friday of last week and identified 500 factories residing in the Wuhan area. This area serves as a manufacturing hub for automotive, high-tech and optics related supply networks. Obviously, these will be the first to be impacted, and today, Hyundai Motors announced a temporary suspension of auto production within its South Korean auto assembly plants due to parts shortages. Honda, Toyota and other auto makers have similarly indicated production plant shutdowns for China based production facilities.
Other reports point to manufacturers becoming increasingly concerned to the cascading effects, given the ongoing quarantine and containment measures and the possibilities of extended factory closures.
We remain of the viewpoint that the overall wider spread impacts of the outbreak are yet to definitively be determined, despite all of the media hype as to which specific industries will be the most impacted. From our lens, it is still too early for such sweeping declarations and prognostications. As industry media, our role is to pragmatically inform and advise as to implications.
History is often a good signpost as the potential scope of impacts.
Reflecting back on major disruptive events such as the tragic earthquake that struck Japan, and the devastating floods in Thailand, all occurring in 2011, the important lessons gained were comprehensive assessments that included cascading disruption that either began with lower-tiered or higher-tiered supply components or material networks, discovered to be sole or limited sourced, globally.
Other lessons reflecting on natural disaster or disease outbreaks point to impacts not showing initially, but later when more definite information became available. Having viable risk mitigation strategies related to people, resources, facilities and equipment all come to the forefront.
Thus, given the many still unknowns related to this ongoing coronavirus outbreak, many supply chain management teams will not specifically know the full scope or limitation of impacts for several more weeks.
Companies such as Apple, Foxconn and others can only warn investors of the potential impacts and that contingency planning is underway to mitigate the known and unknown risks.
The spreading of global travel bans may limit the ability of some supply chains to be able to quickly operationalize contingency plans. However, there may be some positive measures for those organizations that had already identified or initiated contingency direct material supply sourcing strategies outside of China including domestic near-shore sourcing.
An Added Resource
In April of 2018, Supply Chain Matters featured a two-part guest contribution defining Emergency Supply Chains from Matt Shatzkin, a 27-year U.S. Army logistics veteran, Army War College instructor and now Assistant SCM Professor, York College of Pennsylvania. His contribution made one of our top ten Supply Chain Matters blogs read in the year 2018, and we noticed in our January readership statistics a renewal of reader clicks.
Matt began his commentary with the following insights:
“Research supports that the frequency and magnitude of global disaster situations will increase, which will in turn require an enhanced response capability from those executing disaster supply chains. However, enhancing response capability is no easy task; it requires a continued sharing of knowledge among military, commercial, industry, multinational, government, and academic supply chain communities.”
He additionally shares the insights that whereas commercial supply chains adopt both proactive and reactive strategies to address areas of disruption or extraordinary events, emergency and disaster relief supply chains, on the other hand, are wholly defined by the task at hand when an emergency occurs. He notes: “The emergency requires them to come together quickly, and the coordination and information-sharing requirements of these temporary networks are vast.”
We share such insights because they relate to what is currently occurring with the coronavirus outbreak. Emergency supply chains have the first and most essential priority at this time, getting needed supplies and resources to impacted areas as quickly as possible while establishing contingency material sources.
Commercial supply chains will follow either in parallel or shortly after. The current priority should and will be disease containment and emergency response.
Readers can access Matt’s insights here and here.
Current Takeaway
For multi-industry supply and customer demand networks, the priority remains extensive communication, supplier and resource assessment and response planning.
Help in assisting global-wide emergency supply chains to complete coordinated efforts for containment and medical treatment are the obvious current priority of global logistics resources. Lend assistance and a helping hand in these efforts.
The time for planning and assessment is at hand, and the time for action will shortly follow.
Bob Ferrari
© Copyright 2020, The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.
