Actions taken now to mitigate impacts on supply chains from coronavirus can also build resilience against future shocks.

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Supply-chain recovery in coronavirus times--plan for now and the future

Even as the immediate toll on human health from the spread of coronavirus (SARS-CoV-2), which causes the COVID-19 disease, mounts, the economic effects of the crisis—and the livelihoods at stake—are coming into sharp focus. Businesses must respond on multiple fronts at once: at the same time that they work to protect their workers’ safety, they must also safeguard their operational viability, now increasingly under strain from a historic supply-chain shock.

Many businesses are able to mobilize rapidly and set up crisis-management mechanisms, ideally in the form of a nerve center. The typical focus is naturally short term. How can supply-chain leaders also prepare for the medium and long terms—and build the resilience that will see them through the other side?

What to do today:

In the current landscape, we see that a complete short-term response means tackling six sets of issues that require quick action across the end-to-end supply chain (Exhibit 1). These actions should be taken in parallel with steps to support the workforce and comply with the latest policy requirements:

1. Create transparency on multitier supply chains, establishing a list of critical components, determining the origin of supply, and identifying alternative sources.
2. Estimate available inventory along the value chain—including spare parts and after-sales stock—for use as a bridge to keep production running and enable delivery to customers.
3. Assess realistic final-customer demand and respond to (or, where possible, contain) shortage-buying behavior of customers.
4. Optimize production and distribution capacity to ensure employee safety, such as by supplying personal protective equipment (PPE) and engaging with communication teams to share infection-risk levels and work-from-home options. These steps will enable leaders to understand current and projected capacity levels in both workforce and materials.
5. Identify and secure logistics capacity, estimating capacity and accelerating, where possible, and being flexible on transportation mode, when required.
6. Manage cash and net working capital by running stress tests to understand where supply-chain issues will start to cause a financial impact.

Explore each of these six sets of issues here.

Building resilience for the future

Once the immediate risks to a supply chain have been identified, leaders must then design a resilient supply chain for the future. This begins with establishing a supply-chain-risk function tasked with assessing risk, continually updating risk-impact estimates and remediation strategies, and overseeing risk governance. Processes and tools created during the crisis-management period should be codified into formal documentation, and the nerve center should become a permanent fixture to monitor supply-chain vulnerabilities continuously and reliably. Over time, stronger supplier collaboration can likewise reinforce an entire supplier ecosystem for greater resilience.