A Pandemic in The Supply Chain
With Coronavirus quarantines in effect, interruptions and delays are poised to strike across the supply chain.
The coronavirus has been the subject of countless news stories in recent memory. While a vast majority of cases are in China, 18 other countries have also reported diagnoses, prompting the World Health Organization to declare the outbreak a global public health emergency.
Our thoughts are with the people of China and the city of Wuhan, the epicenter of the virus. With millions in quarantine and the numbers climbing daily, it’s become abundantly clear that the effects of the coronavirus are finding their way into the global supply chain. Manufacturers are already feeling the results.
The State of The Coronavirus Pandemic
The timing of the outbreak coincides with the Lunar New Year, a time of celebration and gathering of families in China. Due to the spread of the disease, people have been unable to leave their homes, gather in groups, or do much of anything to celebrate the holiday.
For those of us in the west, such a situation would be the equivalent of canceling the holiday season. From a human standpoint, it’s devastating. From a manufacturing standpoint, it brings the global supply chain to a screeching halt until workers are able to return.
Meanwhile, current totals show 31,400 people affected across 25 countries as of this writing. Current public outcry also criticizes the Chinese police for suppressing early warnings of the virus from a Wuhan doctor named Li Wenliang. Sadly, Dr. Wenliang himself died from the disease on February 6th.
Chinese workers barred from returning to work due to quarantines are anxious to get back to work, if only to ensure a steady paycheck for them and their families.
Foxconn, manufacturers of the iPhone and and numerous other electronic devices, received approval to resume production in the eastern central Chinese city of Zhengzhou, however, only 10% of the workforce has managed to return, according to sources.
Emily Peng, Beijing correspondent from NRP, recounts a heartbreaking story she heard from the southern Chinese city of Xiogan in a transcript that you can read here.
In the transcript, we learn that the city is separated by a river from the Hubei province, which is currently under quarantine. Concern had been rising for some time that people would try to swim across the river in desperation if the quarantines didn’t lift soon.
As Emily Feng reports above, she was told the story of someone who managed to do it. A migrant worker who, desperate to earn a living, paddled his way across the river in a wooden tub, only to be caught and sent back by police.
It’s an incredibly difficult situation that China, it’s people, and manufacturers find themselves in. While China modular construction of hospitals should be applauded, other considerations like when to reopen factories don’t have such easy answers.
Avoiding a Global Supply Chain Breakdown
The coronavirus outbreak is going to have a ripple effect on the supply chain. The first announcements of delays and shortages already started trickling in during the first week of February.
Hyundai, for example, announced that they were suspending production at one of their plants in South Korea because the parts made in China were no longer available.
In electronics, Nintendo announced that shipments of their Switch console would be delayed, and that’s only the beginning. Many advanced factories for semiconductors and advanced chips are located in Wuhan. Pair this with the expected lull from the Lunar New Year, and you have a a recipe for sudden and potentially ongoing delays or shortages.
“When trade slows in China, that obviously means less income for other countries, and it will slow them down as well. In other words, their growth rates are not independent of the Chinese growth rate.”
— Gary Hufbauer, senior fellow with the Peterson Institute for International Economics
Between the trade war, Brexit in the U.K., and now this, the global supply chain is facing a trifecta of uncertainty that experts believe will have ramifications in the semiconductor industry and on China’s economic growth.
Combine this with the fact that this is the peak season for electronics companies to start planning and preparing for the 2020 holiday season, and you can see how the domino effect could play out. Factories outside Wuhan are expected to open sometime before February 20th, but it’s not a guarantee.
The travel restrictions on going to China also pose unique issues as engineers won’t be able to visit and participate in product development. All of these issues in mind, it’s easy to wonder if there’s anything that can be done in a scenario like this one.
Ultimately, there are a few things. In the case of product development, remote software does exist for engineers to participate in the process, it’s just a matter of ensuring that companies give them access to it.
Other manufacturers have already encouraged their employees to work from home wherever possible. In terms of the supply chain, this is where companies will see that visibility is key in a scenario like this one.
The ability to interpret data and volume in your supply chain could be a major tool in a time like this, allowing your organization to pivot towards local manufacturers and suppliers outside of China, but even this may not be possible.
The Human Factor
The manufacturing industry is a resilient one. While there will no doubt be delays, shortages, and repercussions from the coronavirus in the supply chain, risk has always been an issue, especially in recent memory.
Peter Bolstorff, executive vice president for corporate development at the Association for Supply Chain Management, believes that the trade war started by President Trump’s tariffs on Chinese goods may have given some U.S. businesses the tools they needed to react to a supply chain disruption from China.
This in and of itself could have prompted businesses to seek out suppliers and manufacturers in other countries. This is, of course, another reason why distributed supply chains are an effective risk mitigation strategy.
With people at the center of supply chains and the center of this outbreak, it is they who should be considered above all else. After all, we’re all in this together. In the end, it’s the people, both in medical and manufacturing, who will come together to find a way through this crisis.
