More Than Just a Hiccup: Coronavirus and Global Supply Chain Disruptions

To date, around the globe, more than 2,000 deaths are linked to the coronavirus outbreak that originated in Wuhan, China in December 2019.

The illness has since spread to about 25 other countries, with more than 73,000 confirmed cases, according to the World Health Organization (WHO).

While quarantines effect citizens from countries around the globe, the outbreak’s financial impact is starting to be felt here in the United States.

Do your BC and disaster recovery (DR) plans include recovery and response for health crises like the coronavirus?

According to the World Bank, a pandemic can destroy up to 1% of global Gross Domestic Product (GDP). GDP losses can increase up to 5% for a severe pandemic.

What is a coronavirus?

A coronavirus causes respiratory issues that can appear as mild as a common cold to much more dangerous issues like Severe Acute Respiratory Syndrome (SARS).

While research is ongoing, it appears coronavirus transmits through the air and can infect both humans and animals.

The current strain of this virus, 2019-nCoV, had not been previously detected before the Wuhan outbreak.

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The Virus and Its Global Economic Impact

It’s still too early to get an accurate picture of the coronavirus’ global economic impact, but its effects are impacting many industries including manufacturing, banking and finance, and commodities.

More than 10% of China’s population—about 150 million people—are basically confined to their homes. The government has ordered factories and businesses closed.

As a major parts supplier and manufacturer for many global companies, the closures in China directly affect American businesses and supply chains.

Here are a few examples of the economic impact linked to the outbreak:

  • China-based factories are shut down or have slowed production.
  • Some reports indicate automobile manufacturing could drop by 15% in the first quarter of 2020.
  • Shortages of auto parts are directly affecting the industry.
  • Foxconn, which has a partnership with Apple to build iPhones in China, is affected by factory closures. Foxconn says it has contingency plans to lessen the impact of the closures, but only about 50% of its workforce is expected to be back at work by the end of February 2020.
  • The outbreak has led Apple to close stores in China, with Apple announcing it would likely miss sales forecasts as a result of the outbreak.
  • Following Apple’s announcement, the U.S. stock market experienced a decline.
  • There are a number of travel bans and travel restrictions around the globe.
  • Forecasters have decreased oil demand estimates and prices are decreasing.
  • Retailers like Nike and Burberry and companies like Starbucks have also closed stores in China

Managing Supply Chain Disruptions

If the outbreak remains contained mostly in China and new reported cases decline, the overall economic fallout from coronavirus may be limited to first quarter losses, but if it continues to expand, there could be significant and far-reaching global financial impacts.

So, what can you do to protect your organization?

First, if you haven’t already, now is the time to review your supply chain resiliency, including vendor risk assessments.

Here are some important questions to consider:

  • Which supplies, products, processes and applications are most critical for your operations?
  • Who are your most critical suppliers—both of products and digital services?
  • Do you have current, accurate points of contact for each of those suppliers, including contact information outside of business hours?
  • Do you have more than one vendor (preferably geographically diverse) from where you can source critical supplies?
  • Is your supply chain part of your BC and DR plans?
  • Have you conducted a vendor risk assessment for all of your suppliers, including secondary suppliers?
  • Do your suppliers have BC and DR plans?
  • How often do you ask your suppliers to provide you with updated BC and DR plans?
  • What are your Recovery Time Objectives (RTOs)?

When reviewing your supply chain for resiliency, these questions are a great place to begin, but if you’d like to go into more detail, check out our Supply Chain Resiliency Checklist.

Other Disruptions

While the coronavirus is making headlines today, there are many other ways your supply chain can be disrupted including:

  • Power outages
  • Internet outages
  • Labor strikes
  • Supply shortages
  • Natural disasters
  • Cyber attacks
  • Product recalls
  • Geopolitical issues

From health crises like the coronavirus to labor strikes and natural disasters, a myriad of issues can negatively impact your supply chain. Don’t be caught off guard. A robust business continuity program can minimize the effects.

Ready for some hands-on help? Let’s discuss how to best achieve your resilience goals.