UPDATE Coronavirus Impact on the Supply Chain 2

UPDATE: Coronavirus Impact on Supply Chain

As international governments and their health officials follow the virus in attempts to its containment, companies must now examine their supply chains and plan how the virus’s impact will affect their global supply chain and its partners.

More and more, companies supply chains outside China are affected due to the lack of raw materials critical to their production as their China suppliers are facing the strain of restrictions imposed by the government.

At this time, predicting the consequential effects of the virus is becoming more evident, it is contingent on many future factors that are still unknown at this time. Though we already see the disruptions in company supply chains globally.

Companies will begin to feel the impacts on:

• Workforce : Both administrative and assembly due to restrictions or quarantines. There will be many individuals working from home which will slow down productivity and feedback.
• Raw Materials : Lack of supply from China suppliers located in or shipping through restricted areas. Alternative manufacturing areas like Vietnam, Cambodia, Bangladesh, Southeast Asia, etc, will be impacted on receiving raw material and components to produce goods, originating in other countries. You should be speaking to every factory to reconfirm they have raw materials and components to deliver to the expected ex-factory date.
• Transportation : Major hubs capacity will be affected due to air/ocean carrier suspensions for available cargo. We are to expect peak periods, congestion and delays when production and labour resumes. Transportation by air will be impacted severely if market increases ecom deliveries due to the cancellation of passenger flights to and from China. Many of the freighters have also been cancelled further impacting capacity.
• Consumers : Online sales may increase stressing the already congested logistics supply chains due to fear of virus transmission.

Again, the real effects will take time to become obvious; up to several months some industry experts estimate, therefore immediate planning is critical to your supply chain and overall business. From evaluating inventory, alternate suppliers outside the affected areas and mode of shipping considerations to list a few important and immediate decisions business my consider to lessen the impact. A daunting task to say the least. Though this forced exercise may be a step in building a reliable contingency plan for future unforeseen crisis, making your critical supply chain more resistant to the damaging effects of future disruptions.

Q: Is the OEC/CGL China network in compliance with the newly imposed government health and safety regulations?

A: COHESION has submitted the require documentation to the government department and we are ready to resume operations on Feb.10th . Some offices are awaiting approval from the government once they review the documentation. Employees background check on health condition, where they traveled in the last 14 days, when then are returning to the city was submitted to the government. For employees subject to self quarantine, they will be working from home, therefore it will have minimal impact on our workforce.

**Q: Hong Kong & Shanghai along with other South China cities have closed or restricted travel from bordering cities in an attempt to contain the transmission. How will this affect cargo movement? **

A:: The restricted travel policy should remove once the cities and regions resume on Feb.10 for majority of the cities. Some roads which pass through the epidemic cities may still remain closed forcing detours to avoid those restricted area. There is also the truckers and truck drivers that need to resume back to duty which is not clear at this stage. We will be monitoring this daily as of Monday on the availability of trucks and drivers. We are confident it will increase day by day but it may take seven to ten days to ramp up.

Q: It is estimated that under current conditions, a minimum 2 week delay is expected in both air and ocean shipping, is this accurate?

A: The return to work after CNY is traditionally slow with reduced carrier capacity in the market as a norm. The extended holiday business closures combined with the additional vessel/flight suspension, blank sailings by carriers has set expectations to a slower start to the return to normal. As production increases a better estimate will be available and updated accordingly.

Q: How should companies plan for future shipments in this environment?

A: We strongly advise a proactive approach be taken and the following information be acquired for all upcoming shipments. It is imperative that constant contact with suppliers is maintained and cargo delivery dates are verified. A change in the mode of transport is a real consideration in order to maintain production or client delivery dates. Our network will maintain close contact with suppliers on cargo ready dates and keep you informed, assisting you in making the best shipping decision to meet your supply chain requirements. We have been exposed to this challenge in 2003 with SARS. It took approximately six months to get things back to normal. We will all have to adapt to the challenges and inconvenience CV and think outside the box, looking at solutions with options that exist within and outside any affected area. It is about being flexible and knowing all options available at any time to ensure we make informed decisions.

Contact your OEC/CGL representative as soon as possible with your upcoming shipment information and they will contact our overseas offices along with your suppliers and guide you through the available options to expedite your cargo.