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The coronavirus has disrupted U.S. companies in many ways, and nearly three-fourths of them have seen their supply chain significantly affected.
While China has begun slowly reopening as the number of coronavirus cases there decreased in recent weeks, reports of the illness shot up in other countries, and the epicenter of the pandemic shifted to Europe and then the U.S. Thus, multiple supply chains have been compromised as the outbreak spreads, and there’s no telling when those links in the various chains will operate at normal capacity.
“There are waves of effects coming even if Chinese manufacturing gets back to full-go,” says Hitendra Chaturvedi, a professor at the Supply Chain Department of W.P. Carey School of Business at Arizona State University and an expert on global supply chain sustainability and strategy. “As the coronavirus has spread globally, drops in different trading partners’ ability to supply is felt everywhere.
“What this is showing, especially in the U.S., is we need to reassess supply chain strategy and make it stronger to withstand unforeseen, major disruptions.”
Chaturvedi outlines some possible outcomes in U.S. supply chain strategy as a result of the coronavirus:
Learning that cost is not the only consideration. Chaturvedi says that when companies in the future plan their overall global supply chain strategy, they may decide that paying more to establish a more resilient and flexible process would be worth it by reducing risk. “Companies typically find the lowest-cost supplier, but if you have a single source, you’re vulnerable, and that’s what’s happening now,” Chaturvedi says. “This will move companies more toward mitigating risk. That requires making investments. They could stabilize their supply chains by enlisting alternative suppliers, boosting inventories or investing in more diverse ways of distribution.”