By clustering suppliers in a region, a single event like COVID-19 can have an even broader impact than typically expected, a Zurich Canada executive said recently.
“One of the things that businesses can do is look at where they have clustered their supplies and their suppliers,” Chris Snider, property risk services manager and interim head of risk services with Zurich Canada, said earlier this month during a Zurich podcast. “If [businesses] have the ability to move suppliers to a different region or country and diversify across the globe, they can help reduce their localized supply chain risk. Of course, they’ll need to consider the cost of such moves and balance it against their bottom line.”
One thing distinguishing COVID-19 from previous global disruptors is that it broke out in a particularly sensitive region of the world as far as supply chain risk is concerned, Snider observed during one podcast in the series, Risk Insights: Coronavirus – What businesses need to know NOW.
As one of the largest manufacturers of parts and products for businesses around the world, Snider observed, China is highly susceptible to supply chain disruption, particularly since it has suppliers clustered in the region.
And unlike the H1N1 and SARS outbreaks, the coronavirus has forced infected people — and those coming into contact with infected people — to go into quarantine for 14 days or more.
“Cities, regions and in some cases whole countries have gone into lockdown to stop the spread, severely impacting the ability for companies within these regions to effectively continue with their business operating model and provide the necessary supplies of goods and services,” Snider said.
It’s never too early to start learning from the pandemic and applying those lessons to prepare businesses for the next supply chain disruptor, Snider advised. “Now is the time to update your global action plan, which will require monetary investment, as well as investment in time and manpower.”
During the podcast, Snider discussed how COVID-19 has affected global supply chains, and what businesses can do now and in the future to minimize risks. He manages a team of 22 risk specialists in Canada and leads the North American business resilience team.
Related: Early lessons learned from the pandemic: Global demand surge
Snider said businesses should be doing two things “concurrently and right away.”
First, assess your current exposure to supplies that have already been interrupted, and source alternative suppliers. “If you have to prioritize, focus on the supplies that have the greatest impact on your revenue.”
Second, look at locations that have yet to be interrupted and make sure they are secure. “We know where the outbreak is concentrated today, but if you have a supplier in a region currently unaffected or minimally affected by the virus, but an employee has travelled abroad to an infected area and returns to work, they may put the plant at risk for shutdown.”
The spread of COVID-19 is not only impacting shipping lanes, ports and locations, but also people inside manufacturing facilities that are making the products.
“Businesses that are better prepared to address their supply chain risks are typically going to recover more quickly than those that are just beginning to understand how to strengthen the weak links.”
