In late December, several cases of suspected pneumonia were reported in Wuhan, China. By the end of the first week of January, however, the World Health Organization identified these as the first cases of the coronavirus (technically, COVID-19). The new virus is related to the SARS virus and is one of a family of viruses that attack the upper respiratory system. The disease spread rapidly, and in less than a month, thousands of people across China and other parts of East Asia were affected. There were multiple deaths, primarily among the old and those with compromised immune systems. By mid-February, confirmed cases had been reported in Europe, Africa and North America.
By the beginning of March, multiple coronavirus encounters had been reported in Japan, and confirmed infections in South Korea had outpaced new cases in China. The rapid spread of a potentially fatal disease triggered global ripple effects, beginning in Asia and spreading throughout the world to varying levels. Large manufacturing facilities, including some owned by Samsung, LG and Foxconn, were shut down to stop the spread of the virus.
China, Japan and South Korea account for more than a quarter of overall U.S. imports and greater than half of American computer and electronic component imports. Disruptions in the supply chain rapidly hit American technology, with companies as large as Google, Apple, Facebook, Amazon and Microsoft identifying product delivery shortfalls and delayed product launches. The effects spread beyond the mere physical delivery of parts, as corporations began limiting travel, canceling conferences and modifying quarterly and annual sales projections.
As globalization has consolidated various industries in geographic locations over the past several decades, vulnerabilities to supply chain disruptions have increased at a commensurate pace. The flip side of efficiency is exposure to unforeseen incidents: as we’ve centralized production efforts, we’ve also concentrated risk in these areas. Several industries have experienced some insulation from this; for example, auto manufacturers tend to build factories localized to a distribution region, sourcing raw materials from suppliers that are more regionalized than centralized.
The more specialized a product is, however, the less likely it is to be manufactured at multiple, redundant factories. Technical component manufacturers will continue to remain highly centralized, however, leaving businesses with two urgent questions: what do we do now, and how do we prepare for similar events in the future?
The Short Term
Short-term goals should be centered around mitigating the current crisis to the maximum degree possible. The first thing you should do is research your supply chain and closely follow the news covering affected countries and manufacturers. While this might not prevent your business from feeling the effects of any shutdowns, it can help you better manage the repercussions of the interruptions you are forced to face. You’ll be able to prepare your customers and manage expectations for any delays.
Second, you should develop risk mitigation strategies to prevent the virus from impacting your business as much as possible. Amazon and Microsoft are allowing increased flexibility for their employees to work from home and attend conferences virtually, mitigating tech supply chain interruptions by leveraging technology to the maximum degree.
Finally, search for alternate supply sources. Your options might be limited in the near future as your competitors are likely doing the same thing. Some delay is inevitable, but it doesn’t hurt to look, catalog potential resources and refer to them as they are needed in the future.
The Long Term
In the long term, you should evaluate your supply chain and find redundant suppliers and manufacturers. Consider diversifying your production among several sources; at the very least, you should establish contact with alternate options and work through initial discussions and product specifications before issues like the coronavirus develop and begin impacting your company.
Identify potential vulnerabilities and subscribe to news alerts in the area. Maintaining situational awareness of developing concerns will allow you to react more quickly, orienting your company to evolving circumstances and potentially gaining a competitive edge over other corporations that aren’t as proactive.
Consider adopting long-term remote work strategies for your employees. The more that you can embrace physical separation from potential vulnerabilities, the more stable and predictable your business can operate.
For information on our solutions for securing your smart factory and protecting your supply chain, contact us at 866-399-1084 or firstname.lastname@example.org.
Moiz Bhinderwala leads the technical services and logistics teams at Dynamic. With more than 10 years of experience in the IT industry, Moiz has deep knowledge of the complex technological landscape, working closely with clients to understand their IT challenges and help design custom technical solutions to meet their business goals.