David Carlson
U.S. Manufacturing & Automotive Practice Leader
The continuing coronavirus outbreak has demonstrated the double-edged sword that global supply chains can represent for manufacturers. Yes, they can enable just-in-time production. But they can also be highly intricate, leaving little room for resilience in the face of critical disruptions such as those caused by COVID-19.
As the outbreak continues, manufacturers must identify their key vulnerabilities, take steps to keep supply chains up and running, and plan for the future.
Shortages are already emerging. One global manufacturer has announced shortages of parts from China that it uses to build construction and agricultural vehicles. Another has halted some production in South Korea because it’s running out of parts. And yet another is exploring the use of air and sea access into Vietnam to prevent delivery delays as China restricts land routes.
With many manufacturers carrying inventory of only two to four weeks, disruptions and uncertainty will persist as the outbreak continues. So far, effects have largely been felt by businesses with very lean supply chains, but deeper systemic disruptions may yet emerge. As the virus continues to spread, we are starting to see impacts on other major manufacturing and trading centers, including in the Middle East, Europe, and North America.
Most manufacturers already know who their critical suppliers are. But they don’t always know who their suppliers’ suppliers are. That means they still need to map and understand a significant but hidden vulnerability in their supply chains — and that it’s difficult to predict the impact of shortages and stoppages on their output.
No company operates in isolation, so it's essential to identify continuity risks, any potential bottlenecks, and any single points of failure. By building a simple, three-step action plan, manufacturers can manage the impact of the COVID-19 outbreak or a similar future event. These three steps include:
By building robust action plans, manufacturers can better position themselves to change suppliers on short notice, monitor potential pinch points, and implement other measures to stay resilient during this crisis and the next one.
U.S. Manufacturing & Automotive Practice Leader