How to Mitigate Supply Chain Risk from Outbreak of the Coronavirus Covid-19

Almost all the countries around the world are embracing sweeping measures to curtail the proliferation of the new coronavirus Covid-19 pandemic, such as shutting down airports, sealing their borders, imposing travel restrictions, etc. Scientists are looking somewhat dazed. Flights have been halted, goods-carrying ships have been blocked, which results in isolation of one country.

Outbreak of the Coronavirus Covid-19The economic state tends to decline in every country, and concurrently the supply chain is being disrupted. As a result, entrepreneurs are undergoing numerous challenges that have impacted business functions to a great extent. The business operation might culminate incomplete closure due to the failure to cope with unforeseen circumstances.

The most significant success factor in supply chain management is the willingness and the ability of supply chain professionals to anticipate, accept, and adopt the changes or weakness or pitfalls or shortages. Modern supply chain strategy takes into account a variety of local as well as global risks, which can jeopardize supply chain activities. Vulnerabilities are categorized into the following four:

  • Natural hazards, such as earthquakes. floods, hurricanes, tornadoes, etc
  • Human-caused hazards such as political violence, public strike, etc
  • Technology-related hazards such as equipment failure
  • Health hazards such as the outbreak of various diseases like COVID-19

Is your Supply Chain Ready to Manage COVID-19’s Consequences?

Admittedly, the exposure of this coronavirus (COVID-19) has already made the world think. The function of the supply chain is hugely hampered. The countries, especially those that are dependent on imported raw materials and service, will be profoundly affected because the government has already imposed various types of restrictions on incoming at ports. Conversely, it is blatantly true that current stock cannot meet the demands for a longer time. What will happen next? How effective your supply chain is?

How to Avoid Supply Chain Disruption?

Manufacturing companies rely significantly on a supply chain for raw materials that are required for production. Thus, each company markedly designs its supply chain to run the business operation smoothly.

Though managing supply chain risk is daunting, there are some strategies that work well to combat supply chain disruption

1. Supplier selection

You must be careful enough to select your supplier. Choosing the right suppliers is not the only key to business efficiency, but also protects your supply chain. Many of us always focus on mere price and keep buying from the supplier who is offering the lowest. What will happen when your regular supplier fails to produce or deliver?

Experts recommend sourcing multiple suppliers and continue buying from the best two suppliers regularly. You can place a purchase order of the maximum percentage of your total requirement to your primary supplier and the remaining quantity to your secondary supplier. In case of the inability to procure the items from your best supplier, you can easily switch to another option without interrupting your operation.

Apart from these two, you can make a test-buy of small quantities and let them know that you are not committed to anybody; instead, you always accept the best offer of any supplier. Enlist the suppliers as long as the quality is acceptable.

Most of the companies depend on a single supplier. On the contrary, depending on a single source implies you will be not only influenced by that company, but also your business will hinge on the economic and political situation, weather, and natural disaster of that country where the supplier is located.

China has been playing a pivotal role as a source of raw material, packing material, equipment, spare parts, and capital machinery. For this reason, the outburst of COVID-19 in China made the other parts of the world worry.

2. Backup Plan

To mitigate potential risks, manufacturers should consider choosing a backup plan for each stage in the supply chain, starting from procuring raw materials to deliver the goods to customers. For example, your primary supplier has gone for a long hiatus, or your demand has increased suddenly, and your supplier is unable to supply excess raw material. On the contrary, finding a new source not only requires time and money but also holds uncertainty as to the quality of raw material is good or bad. You can hire third parties for their quality inspection service and recommendation, which might help you to select suppliers quickly.

However, it is always essential to use all of the resources at your disposal. All leading companies, who are doing business worldwide, have a dedicated risk management team. If you are prepared and have planned well, you could efficiently respond to any catastrophe. Unexpected circumstances will be less likely to affect your business. Here are a few backup plans that can prepare your business to handle any discontinuity in your supply chain operations when it happens.

  • A. Backup Supplier: Having multiple suppliers from different regions reduces the dependency level. Moreover, if you have a local source, you can support your production in case of any crisis.
  • b. Backup Process: You must design your supply chain process considering the uncertainty at different levels, which is beyond your control.
  • c. Backup Logistics: Most of the companies have a single warehouse from where they deliver the goods to your retailer. You may think of opening a small warehouse for emergency support along with a backup transportation plan for shipping the products to your destination without any delay.

3. Supplier Details

Conducting a supply market analysis is never a waste of time or money. Instead, it will help you to identify the potential operational and financial impacts of the failure of a supplier. Besides, it will guide you to take the necessary steps in advance to mitigate the risks. Though risk management is never an easy job, you can adopt a strategic way to minimize the risks and its repercussions.

However, the more you know about stakeholders in the chain, the better you can manage them. Take help from third parties, who are experts in evaluating, in knowing details of Chinese and Asian suppliers.

4. Downstream Chain

The supply chain is a complex chain where upstream, in-plant, and downstream are interrelated on each other for the continuation of supply chain activity. Any kind of disorder in a company’s upstream business poses a threat to its downstream. So try to keep your downstream supply chain intact.

Unfortunately, a supply chain disruption is unavoidable. Unless you develop an effective and robust supply chain process in your company, your company will be at high risk, and supply chain disruption may decelerate your progress.

Similar Posts: How Coronavirus (COVID-19) will Impacts your Businesses in China

Author: AQI Service as a professional quality control service company in China specialized to provide a complete range of quality inspection and testing certification services in China & Asia for global importers, buyers, retailers, and sellers.

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