The holiday peak shipping season is barely out of sight for supply chain professionals, and now the supply chain is facing a new period of disruption. The coronavirus, also known as COVID-19, represents a risk to the global supply chain in 2020, and it is only a matter of time before it disrupts your freight network. As reported by John Divine of U.S. News:
“A Feb. 11 Dun & Bradstreet white paper, “The Worldwide Business Impact of the Coronavirus,” recently highlighted a few startling statistics:
- An alarming 938 of the Fortune 1000 companies had one or more tier-two suppliers in impacted regions in China.
- More than 90% of all companies globally with tier-one (direct) suppliers in impacted regions were headquartered in the U.S. Coming in second was Canada, with 7.5%.
It is not a matter of if the supply chain will be impacted by the coronavirus; it is a matter of time until your organization sees its impact.
Assessing the Risk of Coronavirus Disruption in Your Freight Network
The first issue to consider with the threat of the coronavirus is how governments and healthcare agencies are working to stop its spread. Manufacturers across more than a dozen industries are struggling to keep the impacts caused by COVID19 under control. As explained by the Harvard Business Review, the world’s largest 1000 companies and their suppliers have existing operations within coronavirus quarantine areas, shown by the below graphic.
Unfortunately, supply chain leaders have spent years discussing efficiency improvements and have made slow progress toward diverse supplier relationships. There was a time of prosperity and favor towards shippers in the trucking market, as evidenced by the decline of shipping rates in the spot market for trucking. But now, shippers must be aware of potential risk in a more volatile time, and not assume that freight capacity will be readily available as expected. Supply chain leaders need to start assessing internal threats and working to devise strategies to keep operations and their freight network stable in this time of uncertainty.
Preparation Is Critical to Reducing Damage and Disruption
The simplest way to combat the impact of the coronavirus on the supply chain is to improve the resiliency of the supply chain through its sourcing strategies. This includes monitoring suppliers around the clock, sourcing from multiple companies, mapping the freight network in its entirety, identifying potential suppliers that could have the highest impact, working to establish alternative manufacturing sites or sole-source suppliers, and conducting comprehensive risk management programs that exist throughout the whole year –not just during a time of crisis. Preparation of the freight network is the only way to truly safeguard against disease as disruptive as coronavirus. This is not the first novel coronavirus to threaten the supply chain; SARS and MERS were both coronaviruses too. However, COVID-19 is rapidly shaping up to do more damage, and its effects have already shaken markets around the globe.
Best Practices in Preparing Against Coronavirus Disruption
To make sure your organization is ready for any disruption, let’s boil the strategy down to five most important steps:
- Expand your sourcing strategy to include more countries and suppliers, regardless of the novelty of a product from a certain manufacturer.
- Increase the number of carriers your organization works with to ensure plenty of capacity and volume throughout this current pandemic or other future disruptions.
- Encourage risk management through employee safety and wellness programs, relying on connected devices to share information and avoid face-to-face contact where possible, which will also help stop the spread of the coronavirus in local home communities as well.
- Leverage mobile technology to transform non-essential staff into remote workers, requiring staff only when absolutely necessary.
- Avoid reckless stockpiling of products. While arguments exist for increasing safety stock, do so based on data and demand forecasting, using analytics to consider the impact of coronavirus on shopper preferences and buying patterns.
Prepare Your Freight Network for Disruption With a Diverse, Versatile TMS Platform
The coronavirus is a wake-up call for your freight network standards, says Nives Dolsak and Aseem Prakash of Forbes. While politics have long dominated conversations, it is time to start thinking about meaningful risk management strategies, up to and including climate change, social unrest, public health, and more. Any risk could cause a disruption, and as evidenced by the state of the COVID-19 pandemic, the global freight network is already at its most stressed level in recent history.Learn more about how using a dedicated, diverse, and flexible TMS and partnership with MercuryGate could provide the protective barrier needed to mitigate the COVID-19 risk and those that will come in the future.
