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Your Supply Chain and the Coronavirus: Be Prepared

Industry News

COVID-19 is impacting the entire world on a scale that is unprecedented for most modern industries. Not only are businesses contending with furloughed employees and shutdowns, manufacturers all around the world have to contend with interrupted supply chains. If you want to be ready to weather the storm, there are several steps you should take as soon as possible:

1. Perform an assessment.

If you don't have a solid idea of where exactly your supplies come from, now is the time to correct that. It's important to perform more than a surface-level analysis here: What goods are coming from where? Are they items that are used in the production of personal protection gear, or other materials that are likely to be in high demand? Who supplies your suppliers? How have transit times been affected? If supplies are still available, are they being rationed? It's a lot of information, but all of it is extremely important. With it, you can best determine where to start creating a response.

2. Determine the exact nature and extent of any supply problems.

After assessing your supply chain, it's time to determine which problems exist, or are likely to come up in the future. Your company may be directly affected by mandatory shutdowns, illnesses, or quarantines. If you are not directly affected, ask your suppliers why they are unable to continue supplying you. Examine your contracts very carefully, especially if they invoke a force majeure defense in case of a breach.

3. Spread out the risk.

Your supply chain may have a few dependencies that place it at risk. Any parts or raw materials that come from a single source will be in jeopardy if that source experiences difficulties. If possible, scout out alternative sources for these items so you don't end up having to ration critical supplies.

4. Source locally.

Quarantines and shutdowns aren't just impacting manufacturing—they're affecting shipping, too. Even when supplies are available, it's reasonable to expect delays. If you can modify your supply chain to include local suppliers, you'll have a much easier time getting the goods you need in a timely fashion. The cost of the goods themselves may be higher at the outset, but you'll save on shipping and delays.

5. Parcel out your existing supplies.

Even if you're still able to obtain goods from your primary suppliers, shipping times may be much longer than anticipated. Take a look at your customers, and determine how to best serve them from your existing stock. You may be able to devote your stock to supplying your highest-margin product lines, but this can cause contract disputes with your other customers. Check your contracts and any relevant laws before making a decision either way—it'll make it easier to defend yourself in the event of a dispute.

6. Stay one step ahead of disputes.

In some circumstances, COVID-19 provides a valid force majeure defense, but this isn't going to be the case for every business, or every contract. Head trouble off at the pass and act proactively by staying in contact with customers and suppliers. With any shutdown, some losses are inevitable. You may be able to smooth things over with your clientele by keeping them abreast of the situation, and assuring them that you are doing all you can to fulfill your contact.

7. Examine your insurance policy.

If you have a policy that protects you in the event of business interruptions that are beyond anyone's control, you may still not be covered in an epidemic. Many policies stipulate that there must be physical damage, such as that caused by a natural disaster, for the coverage to apply. These policies are still extremely important in the event of an emergency, but it's best not to assume that they'll be able to help you here.

8. Take care of your employees.

It should go without saying, but make sure your workers are taken care of. Even if you have all of the raw materials and supplies you need, it won't do much good if you are unable to provide a finished product to your customers. Create an adaptable, agile means of allocating your workers, whether it's by expanding teleworking options, increasing automation, or making other adjustments to ensure the safety and stability of your employees.

Looking at the effects of COVID-19 can be scary. As local and federal governments work to formulate and adapt responses to the epidemic, it exposes a lot of uncertainty inherent in the way we do business. That doesn't have to be the case, though—you can ensure business continuity, keep your customers happy, and make sure your employees are well taken care of. All it takes is some careful planning, and a willingness to formulate an agile supply chain capable of adapting to emergencies.