By Mark Nunan, Chairman at Sarginsons
All manufacturers know that dual sourcing is the bedrock of a robust supply chain, but how many really follow established best practice, their own advice and, in many cases, their own policy? With reports of major automotive chains already suffering thanks to the global outbreak – we may be about to find out.
Supply chains have suffered shocks before, such as the Japanese tsunami and the Thai floods in 2019. However, with the timeline of several weeks inherent in seaborne supply chains, there was an automatic buffer that gave companies time to react and to compensate – through air transport, for example. Pandemics are a different beast. They may be far more pervasive in that they are far longer lived, far more difficult to corral and far more inclined to generate panic on a global rather than a regionalised basis.
Apart from the tragedy of the loss of life, the long term effects of this sort of disruption to the supply chain and panic that goes with it will lead to a global recession with mass business failures and unemployment.
Last year, The World Health Organisation warned that the world was entering "a new phase" where big outbreaks of deadly diseases like Ebola will be a "new normal". Thanks to globalisation, mass migration and transport – this pandemic is only the start. That means purchasing directors have to factor in the increased likelihood of pandemics occurring in the management of supply chains.
Mitigating black swan events
Fortunately, there is some hope on the western manufacturing horizon in that automation, rising manpower costs in low-cost countries, quicker lead times and carbon awareness are all conspiring to make manufacturing inside the UK more competitive compared with low-cost counties. This – combined with the arrival of the coronavirus – should focus purchasing managers on looking more actively at domestic or local supply options. In effect, this may be the push the industry needs to embrace dual resourcing and look at solutions closer to home. This process could be greatly helped by government incentives to identify and encourage investments in areas where the country is weak, with a particular emphasis on productivity.
Coronavirus in some form or another is here to stay. Supply chains must react now. As we enter a new era of working from home and self-isolation – supply chains need to be broken up. No longer will it be acceptable to only have one supplier – for example. The time for that is over because coronavirus has changed the face of work forever.
The Telegraph’s Jeremy Warner sums up the future best: “Renationalisation of supply, renewed localisation of production, and a decoupling of major economies from one another, these are likely to be the lasting effects of the virus. For China, it is a particularly unhappy irony: the country that has benefited so much from globalisation has given birth to the virus that may start to kill it off.”