COVID-19: Maintaining your supply chain through coronavirus

02 April, 2020

Organisations dependent on supply chains for their products and materials are particularly challenged during the COVID-19 crisis. Some affected regions are at the heart of many global supply chains. With countries acting to flatten the curve, both production and supply are being impacted. Hard information is lacking, concerns are mounting over depleting or idling stock, and companies fear they won't meet contractual obligations on time.

Understanding how global manufacturers are managing disruptions to their supply chains can help your business structure your responses. As the situation develops, can you ensure your supply chain remains connected, robust and sustainable? Where there are aspects of your business that are under pressure for essential materials and components, are there alternative sources that you can leverage? Are there substitutions that you can make to bridge any gaps?

A photograph of an industrial power plant with large steel pipes and stairs on many levels.

Evaluate the supply chain

Map every aspect of your supply chain. A clear understanding of it will help to expose any potential vulnerabilities. This means beginning with the most critical products and looking well beyond first- and second-tier suppliers, right down to the raw materials, if possible. It is critical to understand the availability of the items your business needs, and potential constraints at every link in the supply chain. Establish mechanisms that help you to have visibility of the status of first-, second- and third-tier suppliers. maintain this data as situations evolve and update the information you rely on as regularly as possible.

Identify alternative supply chain scenarios

Your evaluation process needs to include detailed scenario planning. If your products contain a component from a country that becomes isolated, is there a secondary or even tertiary alternative supply you could leverage? As the coronavirus situation is changing rapidly, contingency plans can run into difficulty quickly. For example, manufacturers who used suppliers in China turned to South Korea as their alternative, only to see that country implement measures to lock down the spread of COVID-19, too.

Identify alternative products and materials

There may be instances where your supply chain is disrupted by a key supplier that has been impacted by coronavirus-countering measures. If you have been proactive in advance of the current crisis, and even if you have not, consider using pre-approved alternative parts or raw-material substitutions where your primary supplier is impacted but a secondary supplier is not. At the most extreme end of the scale, is there any possibility of activating product redesign or material certification resources where reliable second sources of parts or raw material are not already available?

Communicate with your key stakeholders

As a practical manner, companies need to do their best to quantify and communicate with key supply chain stakeholders. In the first instance, you need clarity and constantly up to date information about the status of your supply chain, both in terms of product and material availability and transportation status. You need to update customers about potential delays to delivery of finished goods as a result of supply chain disruption, and give information about your strategy to mitigate that. Clear communication builds confidence. Understand if they have changed their order requirements and factor into your planning. You may also have to adjust sales strategies and customer allocations to optimise profits on near-term revenue or to meet contractual terms.

What should you do next?

Medium-term actions

As manufacturing facilities in affected regions slowly come back on line and information gaps begin to fill, you should consider and address the broader implications for your supply chains. These include:

  • Quantifying the impact of the virus on your S&OP plans relative to supply and demand disruptions, both now and long-term, and future market performance
  • Performing an operational risk assessment on critical business functions
  • Accessing critical supply chain data across all tiers to properly assess potential disruption
  • Preparing to set up a temporary inventory recovery and evaluation process, and pursue alternative sourcing strategies
  • Communicating with key supply chain stakeholders on supply volume and changes to demand volume for the next few quarters
  • Conducting scenario planning exercises to understand the operational implications, financial and non-financial

Long-term actions

Looking to the future, supply chain operations will move toward more comprehensive and proactive modeling in light of learnings from the crisis. The COVID-19 outbreak is likely to result in long-lasting reconfigurations of supply chains to ensure they are resilient.

  • Consider robust continuity planning to protect your supply chain and prevent any repetition of issues experienced during COVID-19
  • Are there alternative local or near-local suppliers and transportation options available?
  • Can you work in a more joined up way with every aspect of your supply chain for better future relationships and mutual benefits?
  • Can you factor in potential product or material cost increases while maintaining profitability and customer loyalty?
  • Have your customers revised their stockholding levels as part of their own business continuity strategy?

We are here to help you

At a time when so many things are in flux, we want to help you to be certain about your ability to sustain your supply chain and your operations. We can help with assessing and testing your sourcing and procurement operating models and contingency plans. We can perform due diligence on new suppliers to ensure that they can meet your sourcing needs, as well as ensuring that any new alternative transport modes and routings are sound and sustainable. However your organisation pivots and reconsiders its sourcing strategies, we are here to support you as you look to succeed through uncertainty.

Contact us

Garrett Cronin

Partner, PwC Ireland (Republic of)

Aoife Harrison

Partner, PwC Ireland (Republic of)

Mark McKeever

Director, PwC Ireland (Republic of)

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