OPR306 CA-3

Assignment on Operations Management

Case:

SCM issue during Corona Virus

Submitted on:

9th April,2020

Submitted By: Submitted to:

Husen Ali Musalman 11717512 Mrs. Amanpreet Kaur

Roll no: A29

Section:Q6E64

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Introduction:

Coronavirus has posed tremendous global disruption in the end-to-end global supply chain.
When we think about supply chain disruption, consider the products we use every day. Each
product entails many elements before it reaches to us the raw material, the manufacturing,
packaging, transportation and distribution. Each one takes a journey using ocean, rail, air and
road before being made available to our store or doorstep. Imagine each of these steps having
its own complex supply chain network connected globally. Once we take one of the nodes out
of commission, we will impact the entire value chain. In the case of COVID-19, it has affected
all of the nodes connected through the China-centric network.

Take toilet paper, for example. Demand has skyrocketed, but shelves are empty due to
production capacity and lead times constraints. The raw material used to make the tissue paper
you buy at the store is linked by a sophisticated network. The factory where it’s made might
not have enough labour or truck drivers to get the raw material to the factory or product into
warehouses and from there onto shelves. This is what we mean when we say that the end-to-
end global supply chain has been affected. From shortages of personal protective equipment to
a variety of grocery items to electronics and apparel coronavirus (COVID-19) has hit the global
supply chain in expected and unforeseen ways, and it seems likely that it could take many
months to recover.

Bouncing back more quickly, said experts, will require supply chain managers to turn to new
ways of managing the supply chain, including using Internet of Things (IoT) data, analytics
and machine learning (ML). These tools will become the foundation on which supply chain
managers gain insight into their markets and erratic supply and demand trends. Having the right
machine learning and AI technologies will help us understand the market and better manage
our supply chain.

While the disruption is now global, its starting point was in China the 800-pound gorilla in
global production. Manufacturing companies that have relied on China for production materials
are feeling the blowback of this dependence some retailers source more than half their
inventory from China, according to 2020 Statista data. Another Statista study indicated
that 44% of retailers expect delays and 40% expect inventory shortages given coronavirus
disruptions on the supply chain. And more than half of electronics manufacturers anticipated
up to four weeks in supply chain delays. That’s a difficult pill to swallow in an era
when customers expect two-day delivery.

Now, companies are scrambling to assess their supply chains, but in truth, managing risk in the
supply chain hasn’t been companies’ focus. The Institute for Supply Management, which
conducts monthly economic surveys, found that nearly three-quarters of the companies it
contacted in late February and early March reported some kind of supply chain disruption. But
44% of respondents didn’t have a plan to deal with it.

As COVID-19 spreads globally, we are seeing increased supply chain disruption, but also
changes in consumer spending habits. Supply chain has been impacted in three primary ways:
limited access to employees due to quarantines, factory closures or manufacturing slowdowns
and limited access to logistics to move goods. Most supply chain organisations are in crisis
management, assessing impacts and response on a daily, if not hourly basis.

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The coronavirus pandemic has had far-reaching consequences beyond the spread of the disease
and efforts to quarantine it. As the pandemic has spread around the globe, concerns have shifted
from supply-side manufacturing issues to decreased business in the services sector.
Supply shortages are expected to affect a number of sectors due to panic buying, increased
usage of goods to fight the pandemic, and disruption to factories and logistics in mainland
China, in addition, it also led to price gouging. There have been widespread reports of supply
shortages of pharmaceuticals with many areas seeing panic buying and consequent shortages
of food and other essential grocery items. The technology industry, in particular, has been
warning about delays to shipments of electronic goods.

The COVID-19 or coronavirus, outbreak is causing significant disruption to global

supply chains.

According to a report from Dun & Bradstreet, 938 of the Fortune 1000 companies have a tier
1 or tier 2 supplier that has been affected by the virus. Trade shift saw Chinese trade
activity drop 56 percent in just a single week in February. And we’ve heard publicly from
brands like Apple, Microsoft, Nissan and JCB about the disruption they’ve felt as their
factories in China closed or operated at limited capacity.

While there are some signs that exports from China are beginning to move again, there is a
growing likelihood that things will get worse before they get better. This is as the outbreak
spreads around the world, resulting in labour shortages and travel restrictions which are further
disrupting the supply chains of global enterprises.

While nobody could have predicted the scale, speed, severity, or timing of the outbreak, could
businesses be better prepared to deal with the consequences? This isn’t the first time we have
faced supply chain disruption.

The COVID-19 outbreak is arguably more impactful than all these events combined because it
hasn’t just created hurdles, it’s completely stopped production, something many supply chains
can’t absorb. But the reasons businesses are struggling to deal with the fallout are the same,
supply chains are fragile.

There are some areas which got affected due to corona virus are explained below:

Impact Area 1: Workforce:

In a bid to limit the impact of coronavirus and provide a degree of risk management, the
government has advised employees to stay at home. This has made employers put measures in
place around travel and site visitors. In the case of factories, it has resulted in goods not being
produced and subsequently exported to dependent markets and other factories. “As the virus
extends globally, supply chain leaders need to think about how to protect the health of workers,
and support individuals who are ill. Providing clear and consistent communication through
human resources and travel security is essential.

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Impact Area 2: Products:

The virus could transform the competitive landscape. Suppliers for commoditised products are
at risk to lose market share, as clients will look into substitute suppliers when they don’t receive
goods on time. It is thought that products associated with brand loyalty will be less impacted
because customers are more willing to wait.

When pushed to make trade-off decisions, supply chain managers must analyse and forecast
the impact of the coronavirus on customer demand and product availability. Companies’
business processes are required to reassess their goods and services in order to mitigate the
effects of the deadly virus. “Supply chain organisations need to frequently reassess their supply
and demand plans based on the evolution of the virus and consumer sentiment. “Supply chains
may also experience sharp increases in demand for products or unexpected consequences from
the event such as panic buying for essential items.”

Impact Area 3: Costs:

There has been a considerable impact to organisations with increased costs of shipping, as well
as a concern of companies meeting their financial objectives. If there are any additional costs
incurred due to the coronavirus, it should be attributed to the entire organisation rather than
individual departments. This will make it easier to assess the costs against organisations ability
to achieve its strategic objectives and manage stakeholder expectations.

“It’s also a good idea to sit together with the legal department and analyse all supplier
contracts. “When the time renewal comes, make sure that the organisation is financially
protected against similar situations that might occur in the future. Supply chains will not be the
same after this event. There will be an increased focus on resilience, risk exposure and business
continuity plans going forward.”

The coronavirus is particularly likely to impact on:

• labour – with travel limited, extended holidays, prolonged periods of quarantine or

difficulties in obtaining work visas, UK businesses may face labour shortages and the
challenge of operating with significant disruption to labour.
• movement of goods – it is likely that there will be significant disruption to the
movement of goods. This could stem from lack of labour to physically move materials,
but also as a potential consequence of government action such as port restrictions
affecting unloading goods;
• provision of services – for businesses providing services, the lack of ability for labour
to move in and out of affected regions could be a significant barrier to service provision.

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There are four questioned which would decide how its going to impact whole globe in case
of supply chain

I. When will we see the impact on the broader global economy?

We already see it. At the Centre for Global Supply Chain Management, we looked at this about
eight weeks ago when the disruption was still localized in China. We saw a supply chain
disruption beyond the planned Lunar New Year shutdown. This unplanned shutdown caused a
rapid chain reaction throughout the world.

This is now a global pandemic and a growing crisis for the financial markets. There are various
scenarios some average to worst. It appears that there will be a significant impact in the short
term to the global economy.

II. What are the long-term changes we’re likely to see?

What is likely to happen with COVID-19 is that we’ll start to see a decoupling from some
long-term supply chain dependencies from the China-centric supply chain network. Initially,
the trade war set the stage to begin the process, and COVID-19 might be the last straw that will
force the supply chain redesign. As part of the redesign, I think we’ll be seeing a lot more
appetite to bring the supply chain close to customer demand with on-shore or near-shore.
Mexico will likely play a more significant role than it has in the past if its government can
stabilize and deal with its drug violence and political corruption issues.

III. How long before things go back to normal?

It will take us two to three months once the virus has passed through our system. China appears
to have stabilized the spread, but data transparency is a big issue. We can see the impact through
the third quarter before the supply chain stabilizes and normalizes. Longer-term goals such as
decoupling from China with a more diversified supply chain network will take a few years at
least.

IV. What is the silver lining here? What can companies learn from this situation?

The takeaway here is that cost should not be the only consideration when establishing your
company’s supply chain. There have to be some mitigation strategies as well, where essential
commodities have several pathways to markets. You have to build these into your company’s
global strategy. we have to think through certain what-if scenarios, so we’re not caught off
guard. Companies need to be proactive instead of reactive.

We, as humans, have become globally connected. With the help of a very sophisticated supply
chain network, household customers can receive their services and products right away. In this
process, we removed access to excess inventory and slack capacity. This phenomenon took
away elasticity to market demand such that there is no room for any disruption, whether caused
by natural disaster or pandemic event. We’ve become dependent on each other’s capacities, or
lack thereof. COVID-19 is a perfect example. When this started, everyone thought this was a
“China-only” issue. We didn’t collaborate in a way that could have helped proactively, or
engage in a way that could have prevented the spread, or collaborate on potential mitigation
plans.

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Timeline regarding affect on Supply chain Management due to coronavirus

➢ January 23 2020, Wuhan china: Severe disruptions to inbound and outbound air
cargo shipments, trucking and rail cargo services as well as heavy port congestion for
vessels along the Yangtze River near Wuhan will likely persist as the coronavirus crisis
unfolds.

➢ February 5 2020:Hyundai Motor Company was forced to suspend production in South

Korea due to shortage in supply of parts.

➢ March 3 2020, As coronavirus spreads, vendors of supply risk management share

their insights:
The coronavirus outbreak has affected supply chains around the world as the virus itself
has spread from China to many countries across Asia, in Europe, the Middle East,
Canada and the United States, which in recent days has experienced its first deaths from
the respiratory ailment.

➢ March 13 2020,India: In India, economists expect the near-term impact of the

outbreak to be limited to the supply chains of major conglomerates, especially
pharmaceuticals, fertilisers, automobiles, textiles and electronics. A severe impact on
global trade logistics is also expected due to disruption of logistics in mainland China,
but due to the combined risk with regional geopolitical tensions, wider trade wars
and Brexit.

➢ March 15 2020, Medical supply's shortages:

As the epidemic accelerated, the mainland market saw a shortage of face masks due to
the increased need from the public. It was reported that Shanghai customers had to
queue for nearly an hour to buy a pack of face masks which was sold out in another half
an hour.

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References:

➢ https://www.mckinsey.com/business-functions/operations/our-insights/supply-chain-
recovery-in-coronavirus-times-plan-for-now-and-the-future
➢ https://www.mhlnews.com/global-supply-chain/article/21122993/impact-of-the-
coronavirus-on-global-supply-chain
➢ https://hub.jhu.edu/2020/03/06/covid-19-coronavirus-impacts-global-supply-chain/

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