The surprising length and complexity of many supply chains will be illuminated sharply by the coronavirus as, for example, when an American equipment manufacturer discovers that a British supplier of a major assembly that they thought they had fully vetted must suspend production because they have an Italian supplier of a sub-assembly who gets an inexpensive, but unique specialty component from an Asian company with a plant in China that has shut down.
Supply chain managers who previously focused their attention one or two levels down into their supply chains will have to go back to work and develop the systems and discipline to track even more deeply into the chain.
Stephen P. Kaufman is a senior lecturer of business administration.
Businesses have been surprised on how dependent they are on China, for everything from key raw materials or parts to finished products. Often they didn’t realize that it was a supplier to their supplier, or further down as a third or fourth tier. The magnitude of the shock means after they recover from the momentary chaos, many will start thinking about diversifying their risk and trying to develop alternatives in other countries.
The biggest losers from the coronavirus [in business] are service industries that have seen their revenues dry up. Airlines, hotels, the travel industry at large, are losing revenue and cash flow that will be difficult to replace. Manufacturers can run overtime and make up for lost production and fill pent-up demand, but services demand is perishable and hard to replace.