A diversified supplier base helps. If you want to stabilise the supply chain, you can:
- enlist new suppliers
- increase their inventories
- invest in omnichannel distribution
However, this needs to be done before a crisis strikes: once it is already with us, finding new alternative suppliers or redesigning a product or process is suddenly much more difficult. If your main supply is coming from China, you may not find any alternative supplier or, even if you do, the new supplier may also be facing complications.
It is possible to survive disruption
When it comes to the supply chain, some companies display a high level of agility. There was a fire in 2000 which disrupted the supply of chips for Nokia and Ericsson. It took weeks to restore production but Nokia deployed its crash plan and coped with the disruption.
Nokia managed in just a few weeks to redesign the chips, boost production and quickly squeeze more out of other suppliers. The result? Ericsson lost nearly 400 million USD in potential revenue that year and later became part of the Japanese company Sony.
Today, overcoming capacity shortages, production planning and equipment delivery requires additional capital. The transportation industry will need extra capital because it faces constraints in both supply and demand. Not all companies have enough money to survive the upcoming months. The government will probably need to offer some form of help.
Sanitisers instead of perfumes
According to an article published by the Wharton business school of the University of Pennsylvania, some companies are handling the current crisis rather well. For example, LVMH (a French producer of perfumes and cosmetics) has repurposed its production lines to produce hand sanitisers to help the country cope with the disaster.
-jk-