CORONAVIRUS and Supply Chain Risk
The World Health Organization has declared a global state of emergency due to the outbreak of the Coronavirus (COVID-19). The ramifications of the travel bans relating to the outbreak and slowed manufacturing due to shortages of labor and raw materials means vendors in your supply chain may be affected.
To learn more on what to expect and recommendations on managing risk in the supply chain, keep reading.
According to Supply Chain Management Review, there are five areas expected to be impacted by COVID-19:
Travel restrictions and quarantined areas will continue, causing material and labor shortages, and limit movement in and out of established hubs and supply networks.
Over 400 companies have warned the impact of the coronavirus on Quarter 1 (Q1) earnings. News outlets Forbes and The Wall Street Journal are predicting these impacts will continue to affect earnings in Q2.
Many suppliers do not have a relationship built with second or third tier suppliers. Do you know which of your contracts are at risk for disruption? Do you have strong relationships with your suppliers?
Deloitte’s published perspective on risk management in the supply chain breaks down 5 steps for proactive risk management. We have tweaked some of Deloitte’s steps to better fit the world of the public procurement professional:
Get to know your potential suppliers
Your sourcing team should use effective due-diligence processes by getting answers for critical questions about third-party business practices. Are there existing business relationships that would create a conflict of interest? Does the company have a strong track record for meeting obligations? ASK—and you shall receive.
Make sure you get what you’ve asked for
Quality control and monitoring of goods and services is essential to upholding a contractual agreement. Despite a supplier’s own thoroughness, it is your responsibility to make sure all goods and services provided are meeting the high standards of your contract. Does your contract include milestones?
Only pay for what you’ve actually received
Complex networks of supply chains increase risk of duplicate billing, inappropriate markups and improper billing. Healthy skepticism among accounts-payable staff can go a long way toward protecting your agency. Empower your employees to be good stewards of taxpayer dollars.
Prevent or resolve disputes effectively
Like death and taxes, supply chain disputes are inevitable at each stage. Continuously review processes for handling disputes or protests to check for needed technologies and resources. Sure, your software/process works, but is it the right software for your needs?
Avoid risks in the solicitation process, too
Thanks so much for this terrific article. The additional link to Koray Köse’s article in Supply Chain Management Review is also excellent. For those with key suppliers outside of the US, the CDC’s daily situation reports are excellent for tracking impacts by country. See: https://www.who.int/emergencies/diseases/novel-coronavirus-2019/situation-reports/
Hi Jim! Thanks so much for the kind words– I am to please.
I’m enjoying the article!
Great article Lori! I learned alot and I think it is a very important article for our membership!