The Coronavirus Covid-19 has taken its toll not only from a disease perspective impacting more than one hundred thousand people, but many companies are taken by surprise of the ripple effect that it has taken on their supply chain, human resources and capability to meet customer demand.
Here is a snapshot on March 9th 2020 on the status of the virus spread which indicates that even with precautions the virus is continuing to spread across the globe:
Here is a link to the live map from Johns Hopkins CSSE.
Business Impact by the Numbers:
From a business perspective Dun & Bradstreet researchers found that many organizations have their direct tier 1 suppliers located in or near the original outbreak region – at least 51,000 companies worldwide, 163 of which are in the Fortune 1000.
According to a Dun & Bradstreet report almost half of the companies with subsidiaries in impacted regions are headquartered in Hong Kong, while the U.S. accounts for 19%, Japan 12% and Germany 5%.
The Chinese economy constitutes around 20% of global GDP (gross domestic product) and analysts estimate that if containment of the outbreak is delayed beyond the summer, the “cascading effect” might cause a drag of around one percentage point on global GDP growth.
History taught us that there will be a ripple effect that is going to impact businesses worldwide like the impact of the SARS virus did.
But in the grand scheme of things other factors caused bigger business disruptions to supply chains like regulatory changes, cyber attacks, changing consumer preferences and natural disasters as pictured in the 2 graphs below:
SARS wiped $40 billion off world markets – what will Coronavirus do?
There will be likely a chain of events that is already set in motion.
The demand for product in the impacted regions in China is declining as personal lives are being disrupted with people staying home, losing their jobs, getting displaced in quarantine and bracing for long term impacts. From a market psychology perspective there will be a fear factor premium expecting a loss of investment and the impact on confidence and therefore spending.
The second wave of ripple effects will be supplier disruption where local facilities in China cannot keep up with production targets and companies worldwide caught by surprise that critical parts are not arriving on time creating a backlog of unfulfilled demands and orders by retailers, distributors and customers.
From a B2B and end consumer perspective we can expect price increases, delays in shipments and empty shelves for products and parts sourced in China and surrounding regions
So what can companies do about this if they don’t already have a mitigation plan in place?
According to Forbes companies like Tesla, Unilever, Honeywell and other major corporations are in the early monitoring and data gathering stage and the search term Corona exploded in January with both companies and individuals trying to get caught up on the virus spread and its implications from a personal and business perspective:
Here are business risk mitigation options to consider:
- Map out the locations of your suppliers, work with your suppliers and offer to help
- Develop a contingency plan for alternate routes avoiding crisis zones supported by route planning software and supply chain analytics
- Develop an inventory of alternative sourcing and vendors of parts sourced in the region
- Team up and leverage your own and your partners business intelligence and supply chain modeling capabilities to collaborate and develop contingency plans
- Retailers on the flipside can expect an uptick in online delivery and home delivery orders for food and household staple items. Companies that have invested in these technologies can mitigate this change in consumption behavior more readily. For retailers that have not explored this before there are plenty food and personal shopping apps to consider.
- Take care of your people – employees that are in the midst of this need a break from all the emotional and physical stress. Offer flex work schedule, plan for reduced capacity and for your people’s work life balance.
What are your contingency plans for the Coronavirus disruption of your businesses?
Disclaimer: The opinions expressed in this post are my own personal views regarding IT strategy, trends and architecture.