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Lessons from the Coronavirus Outbreak on Outsourcing

Posted by admin

April 13, 2020    |     4-minute read (764 words)

The coronavirus outbreak has impacted businesses all over the world. Obviously, the main emphasis is — and should be — containing and mitigating the disease itself. But the economic impacts are extremely significant and cannot be ignored. Numerous companies are trying to understand, react to and learn from the rapidly unfolding events.

As governments and healthcare agencies work to control the spread of COVID-19 while treating those who are infected, manufacturers in many industries are struggling to manage the pandemic’s growing impact on their supply chains.

In many cases, while this supply chain crisis stems from such decisions as sourcing from just one supplier or one region, the problem has had a domino effect, ultimately leading to a short supply of products for the end user.

In addition, even when the global supply chain disruptions caused by coronavirus end, a large number of companies expect businesses to not return to normal for at least six months. According to the latest CNBC Global CFO Council survey, 40 percent of companies that already have or expect to have supply chain issues said that it could take between three and six months to get business back to normal once the issues subside.

To thwart this, supply chain leaders must evaluate and plan for how disasters like COVID-19 are impacting them, and should urgently take measures to protect themselves in the future. Consider these options to mitigate this issue going forward.

Build Multiple Supply Chains

By having a variety of suppliers, companies can match the appropriate supply points with the appropriate demand points. Businesses can also stabilize their supply chains by enlisting new suppliers, boosting and managing inventories, and investing in multiple channels of distribution including online sales.

Embrace Technology

Digital technology can help entrepreneurs make better decisions and prioritize things whenever there is a choice to be made. “For many companies in China, the problems were compounded because they don’t have the technologies to support these simulations; so, they’re unable to anticipated demand and supply by looking at multiple scenarios,” explained Bo Zhou, founder and EO of FuturMaster. Manufacturers of all sizes should adopt technology to make themselves flexible enough to weather supply chain disruptions.

Another area where technology can be employed is warehousing. Information systems, robotics and automation technology have made warehouses more efficient at locating and picking stocked items.

Make More with Fewer Resources

During a crisis, manufacturers must know how to produce more with reduced resources. This can be made possible by optimizing production via lowering setup times. Manufacturers must also produce more efficiently. Having updated demand planning data allows them to produce only what is most in demand and profitable.

Monitor Global and Local Suppliers

At the basic level, companies must invest in round-the-clock monitoring of their suppliers. Artificial intelligence, natural language processing and other new technologies have made supplier monitoring affordable and easily accessible.

This way, when disruptions occur, companies can evaluate within minutes or hours how their supply chains could be impacted in the immediate and distant future. When companies are aware of where the disruptions will come from and which products will be impacted, they have ample lead time to execute avoidance and mitigation strategies immediately.

Develop Business Continuity Plans

Continuity plans help businesses identify contingencies in critical areas and include backup plans for transportation, communications, supply and cash flow. Manufacturers should also involve their suppliers and customers while developing these plans.

Monitor for Early Warning Signs

Businesses should have procedures and processes in place to identify problems early on and accordingly act on them. Innovate when necessary to mitigate those early warning signs and put action plans into place.

Anticipate, Prepare for and Respond to Risk

Having an end-to-end supply chain risk assessment and management plan is important for growth, profitability and customer service. Optimizing the supply chain from risk, cost, cash, quality and growth perspectives can help secure supplier relationships, prevent supply bottlenecks and ensure that companies are operating both legally and ethically.

It’s impossible to foresee the arrival of global crises such as the coronavirus outbreak, but companies can mitigate the impact by taking supply chain preparedness to the next level. They must act before a disruption happens and adjust and execute fresh plans afterward, rather than starting from scratch every time they are left to deal with a new crisis.

While it is imperative to be self-reliant, it is not always practical to do everything in-house. Outsourcing, when done right, can vastly increase competitiveness and strengthen businesses. It can also help increase production capacity, reduce fixed costs and increase profit margins to higher levels.

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