Coronavirus reminds us to review supply chain continuity plans

The rapid escalation of the Corona virus has now devastated China and other regions, resulting in more than 800 deaths and more than 37,000 cases worldwide.  The most critical outcome of this issue is the tragic loss of life, but for those who work in supply chains, it is also a time to “dust off” your business continuity plans, and begin to think through how the virus may spread and impact your business enterprise.

For those industries that buy a lot of their supply from China, Beroe Live developed a very insightful set of analyses related to specific category-level impacts, as entire industries and provinces in China are shut down.  China is the epicenter of global manufacturing, and as a result of quarantines and shutdowns, major portions of their supply chain will be cut off from the rest of the world.  In China, the key provinces for the procurement of mechanical components, and electronics and electrical components/services in China include Guangdong, Fujian, Zhejiang, Shanghai, Jiangsu, Shandong, Beijing, Hunan, Jiangxi, etc. The majority of these provinces has reported 100+ cases of coronavirus.  Other categories like cotton and rigid packaging will have major challenges in cross-border trade.  Major ocean freight shippers are expecting delays in the movement of goods in and out of China since a large number of ocean freight carriers have stopped operations across the country due to the new airborne disease (coronavirus).  Real estate, travel, and professional services will be impacted, as people are quarantined and can no longer travel for professional conferences and busieness meetings.

Given these challenges, this is an opportune time for supply chain executives to “dust off” their business continuity plans that probably haven’t been looked at since the SARS outbreak of 2008-2009.  During that period, I worked on a study with the IBM Business of Government institute on “The Role of the Federal Supply Chain in Preparing for National Emergencies“.  In this report we note that one of the most important observations regarding preparedness planning is that 85 percent of the assets required to respond to any emergency resides within the private sector. As a result, governments must work collaboratively with its private sector partners in order to respond to and limit major systematic disruptions caused by a potential disaster. This report, however, is applicable to multiple threats to public and private supply chains, and focuses on how to prepare for threats such as the Coronavirus.  In the report I proposed four stages of planning:

  1. Supply Chain Team Governance. It is estimated that at least 10 per-cent of an enterprise’s business continuity planning budget should be devoted to emergency planning in the supply chain. Ideally, a Supply Chain Planning Team (SCPT) is formed as a dis-tinct entity focused on ensuring business continuity in critical supply chains.
  2. Supply Chain and IT Risk Assessment and Planning. Once established, an SCPT needs to conduct an in-depth assessment of potential “at risk” agencies, enterprises, and nodes, as well as of critical employees and sup-pliers within each node. Leaders must engage in a full-scale “what if?” analysis to determine and identify high-probability failure points/nodes in the supply chain.
  3. Strategic Stockpile Planning. Strategic stockpile requirements need to be defined, with a specific focus on those high-risk nodes in the supply chain. The focus of these assessments first should identify the impact of a general class of disruption events, without specifically identifying what the nature of that disruption may be.
  4. Supply Chain Education and Training. Training and education programs for staff at “at risk” agencies and their critical suppliers are critical. While the details of a training and education program may change based on different criteria, the business continuity team should be familiar with a high-level overview of different scenarios that might be possible so that they know what to expect.

In the meantime, there is hope of a potential drug on the horizon.  None other than one of our SCRC partners, Gilead Sciences, has partnered with Chinese health authorities to conduct a randomized Phase III clinical trial to assess the use of antiviral drug candidate remdesivir (GS-5734) for the potential treatment of coronavirus.  I happened to be visiting Gilead’s headquarters in Foster City (pictured here as I walked in) this past week, and there is a lot of activity both internally to reach out to its employees in China, as well as externally, to work on finding a cure that will treat patients all over the world.  Gilead’s dedication to patient’s lives first and foremost was clear to me during my visit.

Despite the promise of a cure, developing a solid national threat emergency is still a priority, and there’s no time like the present.