Skip to content

Blog 20 Min Read

Coronavirus impact on Supply Chains, And What You Can Do About It.

Crises of great magnitude, be it epidemics or natural disasters, have the potential to upend business as we know it. The ongoing coronavirus pandemic has dealt the most devastating blow to supply chains in the US and Europe in recent years. It also doesn’t help that the earliest hit was taken by China, the country where almost all supply chain processes originate.

Around the globe, companies that are dependent on China for their materials or parts are severely affected. China’s coronavirus crisis has damaged its position as a manufacturing hub for the world. It is likely to remain that way for several months. From iPhones to bridal wear, anything and everything manufactured in China for assemblage or sale around the world is impacted and supply will be erratic or nonexistent in the coming months.

According to Dun and Bradstreet, a commercial data and analytics company, there are around 22 million businesses (90% of all businesses currently active in China) within the coronavirus-struck regions. They estimate that this will impact at least 56,000 companies worldwide. 

Since the SARS epidemic hit in 2003, China’s GDP in the world context has steadily grown over fourfold; from 4.31% to 16%. The mortality rate and spread of COVID-19, the disease brought about by the coronavirus, is enormous and catastrophic compared to SARS. The damage to supply chains is similarly huge. 

In general, companies always maintain some reserve inventory on hand to tide them through the initial stages of a crisis, to keep about 15-30 days’ worth of supply going. Since the coronavirus hit around the Chinese New Year, a prime shopping period, it is possible that companies that upped those numbers have bought themselves some additional time. But beyond five weeks, a lack of materials or supply would make manufacturing grind to a halt. 

 

How can Automation and Artificial Intelligence help?

 

Automation and AI can help in getting businesses back up sooner. 
When implemented from the beginning and made part of the system, it can help in these critical areas:

1. Estimation of stock:
At times like these, you want to know where your inventory is spread out and how fast you can access it. You want to know where your finished, ready-to-ship goods are, where your raw materials are, parts in transit are, parts held in customs are, whether any stock is on consignment with vendors or dealers, and can be recalled.

It definitely helps to use automation to figure out where all of your stock is and how best to move it to the right warehouses and fulfillment centers.

The best way to do this, of course, is to use computer vision to estimate existing stock across your warehouses. This can significantly speed up the process of auditing stock at a time when any delay can cost you mightily.

2. Gauging demand:
You never know when the demand for a particular item you manufacture or supply may skyrocket during a crisis. As a supplier, you need to get the most realistic picture of this demand before you start rallying. This is where data can help. Your demand-planning team can deploy analytical tools to understand demand signals and figure out the corresponding supply. This can further be worked into your revamped sales and operation planning processes.

3. Monitoring global suppliers:
Investing in 24X7 monitoring of global suppliers through AI and natural-language processing gives companies preparation time and “insurance” against rapidly changing circumstances. 

Timely alerts to disturbances happening half a world away help companies rapidly triangulate how their supply chains will be affected. They can make predictions about the hours, days, weeks, months to come. This kind of prior knowledge is invaluable and can be leveraged before the situation escalates.

4. Leveraging communication channels:
AI data benefits can extend to direct-to-consumer communication channels and get your market insights. Digging into your databases and sourcing info from your vendors and customers about theirs can help you assess the demand status a few stages downstream. It can also help you reach out to direct customers and get an estimate.

5. Managing risk to reduce the impact of a crisis:
Companies would do well to be acquainted with all tiers of their supply chain. For instance, if a company’s third-tier vendors are in China, they may not always know where they are located, who they are, because they have never directly dealt with them. 

On the other hand, they should know the risks of single-sourcing from China (dealing with only one vendor for a cost-benefit or to secure their supply), and always have backups. 

When scaling up operations to meet increased demand, it is imperative to provide workers at manufacturing units with adequate PPE (personal protective equipment) too.

That’s not all, though- risk comes also in the form of direct infections and the risk of spreading the virus through a large, enclosed space. At the same time, manually enforcing restrictions doesn’t always work. You can use a tool like Saara’s computer vision tool to help you understand which workers are following the laid procedures and who is flouting them, at scale. 

What are you doing to mitigate the crisis?

These are just a few ways of mitigating a crisis that is expected to role the economy for at least a year to come. How are you weathering the storm? Do you have any tips to share with fellow supply chain professionals? Tell us in the comments.