The impact of an epidemic on the supply chain
The crisis of Covid-19 has had a strong impact on all components of the company and in particular the supply chain. The decrease in production of factories or even their shutdown, the closure of borders or the strong increase in demand for certain products have led to difficulties in obtaining raw materials or finished products. This thus highlights shortcomings in the organizations set up. This global pandemic will certainly not be the last health or environmental crisis that could damage the management or the future of businesses.
THEWorld Health Organization believes that other epidemics linked to the appearance of contagious diseases will occur in the coming years and it is clear that extreme environmental events (storms, cyclones, floods, etc.) are intensifying. It is therefore essential to guarantee the sustainability of the company to restructure the supply chain has long been obsessed with minimizing costs and inventories. To effectively lead this transformation, it is necessary to conduct a profound reflection based onrisk approach.
Dependency on suppliers
The identification of risks is an essential step in initiating effective management of external service providers. A supplier is by definition a company that evolves in a context that is essential to know. The current crisis has hit businesses hard, especially those that are too dependent on suppliers based in China. It is important here to understand the chain as a whole, that is to say the first-tier suppliers but also the vendors 2nd row. Every organization must ensure that it has control over what it buys but also what its own vendor buy. It is not impossible to have several suppliers sourcing from the same manufacturer. In this case, the dependency ratio is only slightly diluted between suppliers.
It is also necessary to broaden the debate and to analyze dependence on a geographical area. When China, and in particular the Wuhan region, had to take measures to combat Covid-19, this led to major disruptions in the supply chain of a large number of businesses. In view of health and environmental forecasts, it now seems inconceivable not to seek to distribute the supply of strategic products geographically.
Even if this should have consequences on purchase prices or complicate the supply chain, businesses should take the necessary actions to reduce their dependence on a supplier, regardless of its rank, or to a geographical area.
Reassess the existing
These are only the obvious findings of the effects of the coronavirus crisis on the supplier risk management. This supplier management must obviously be the subject of a global analysis taking into account macroeconomic, technical, human, contractual, societal and financial risks. These risks must be rated and reviewed, measures must be implemented to minimize them, and external service providers for their part will be evaluated regularly.
Undoubtedly, purchasing policies, which are too largely focused on the constant search for minimum costs, will have to evolve and learn from the current crisis by including new parameters or by reevaluating existing ones.
