Coronavirus (Covid-19) has been spreading rapidly across the globe and has been causing severe disruption in global supply chains.
In an effort to better understand what is happening on the ground and the response functions are taking to this disruption, Procurement Leaders brought together CPOs and those in their teams leading response efforts.
Below is a high-level summary of what our community told us.
What we heard
Quarantine measures are severely disrupting logistics networks
One CPO based in China told us that quarantine measures are in full swing, the streets are mostly empty and strict internal borders have been implemented. This is clogging up logistics networks and making the movement of goods in, around and out of China very difficult.
Procurement functions right across the board are currently at other countries for alternative suppliers as well as substitute products, but with everybody doing this, it is a highly competitive market. One concern was that if and when these new suppliers or new products were found they would still need to be on-boarded correctly and efficiently so there were still significant challenges ahead.
Challenges sourcing facemasks
In what will likely become the defining image of this outbreak, sourcing facemasks has become one of procurements most pressing jobs. The Chinese government requires any businesses that wants to re-open to have facemasks ready for staff to use. Functions have been looking to source these from all over the world but getting them into China is a challenge because of customs checks and if they aren’t in place, production lines cannot re-start. Hence why this has become one of procurements most pressing tasks.
Travel has been suspended
Travel to and from China has been banned by the vast majority of organisations. Face-to-face meetings have been suspended as have trade shows and conferences. Suppliers have been instructed not to travel to sites and this has been replaced largely with virtual meetings.
Working from home a policy widely deployed
Teams based in cities throughout China and Hong Kong have been advised to work from home. Some organisations have adopted self-quarantine measures for their staff in order to try and help contain the spread.
What comes next
Expectations for when operations would return to normal ranged from a few weeks to months. The situation remains fluid and that disruption would continue for some months yet.
The focus of efforts now is to get staff back to work, which can only happen with a clear supply of facemasks as well as searching for potential new sources of supply.
As for what will happen longer-term, we noticed an emerging trend in 2019 of functions beginning to look at the localisation or regionalisation of supply chains. This is where procurement functions focus sourcing on building up supply bases around key local markets. While this was expected to take place over the next couple of years, this outbreak may act as a catalyst to speed that process up in order to not only mitigate such a risk, but also make their organisations more agile.
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This article originally appeared on Procurement Leaders’ CPO Crunch, a free, weekly resource for CPOs that provides analysis of the latest trends that are shaping the agenda of procurement functions across the world. You can get these direct to your inbox by signing up here.