Risk and resilience

From the February 2020 print edition

What a year it’s been so far for the business world.

We can start with the UK, Canada’s largest trading partner in Europe, which left the European Union on January 31.

We have yet to ratify the new Canada-United States-Mexico Agreement (CUSMA) on trade, the only signatory not to do so.

Demonstrators have effectively shut down rail lines in solidarity with protesters who oppose a pipeline crossing traditional territory of the Wet’suwet’en First Nation.

No one can say that supply chain is dull.

Yet, perhaps the most pressing global supply chain issue remains the coronavirus, a flu-like illness apparently originating in Wuhan, a central Chinese city of 11 million, also a manufacturing and transportation hub.

As a result, certain commodity prices have tumbled, mail service has been delayed and flights cancelled. Factories have closed, logistical bottlenecks abound and much of the country effectively shut down.
What affects China’s production capacity affects us all. The country has the world’s largest manufacturing workforce. It makes 80 per cent of the world’s smartphones and notebooks and accounts for about a quarter of the globe’s automotive production.

Risk is an inextricable element of supply chain management and there are plenty of uncontrollable elements. Simply pulling out of China altogether is, for many companies, not feasible.

So what to do?

Josh Nelson, supply chain principal at the Hackett Group’s Strategy and Business Transformation Practice, offers a few tips in an overview document the organization has released. Get to know your supply chain risks and develop mitigation tactics for potential risks, Nelson advises. Get as much visibility into your supply chains as possible.

Nelson notes that companies or key suppliers that carry limited raw material inventory and rely heavily on Asian supply sources remain at risk of disruption. Along with knowing your supply chain risks, Nelson notes it may be helpful to consider increasing the levels of buffer inventory.

“As in other areas of business, those companies who identify specific supply risks and actively manage it, will find solutions or at least mitigate the impact,” Nelson says. “Those that don’t are at the mercy of the virus and the public response.”

Michael Power is editor of Supply Professional magazine.