Almost 75 percent of US companies are experiencing capacity shortfalls in their supply chains, due to Coronavirus-linked transport disruptions, a new study has shown. More than 60 percent of firms said delays were related to orders from China.
With some 5 million companies impacted by China’s supply chain woes, the picture is similar in other parts of the world.
Companies whose supply chains have been pounded by Coronavirus-linked disruptions fall into two broad categories:
- Those that accept their fate, hunker down, try to limit the fallout, and brace for losses in Q1 and Q2—and possibly even further into the future.
- Those that look for new marketing opportunities despite the brittle trading conditions.
A study of the tactics employed by companies falling into category 2 may provide lessons in shrewd supply chain management that we could all learn from.
Companies That See Supply Chain Disruptions as Challenges
The Auto Industry
With the global auto industry heavily reliant on components from China, many assembly plants in Europe have had to shut their doors and send workers home.
The US auto industry is expected to follow suit as stockpiled inventory becomes depleted. Some US manufacturers, however, have resorted to airlifting supplies from China at a premium price. They are gambling on the expectation that they will be offering vehicles for sale, even when their competitors’ plants are still at a standstill.
These smart operators include:
- John Deere: The agricultural vehicle manufacturer says it expects to spend $40 million (USD) on expedited freight to ensure there is no disruption in supply.
- General Motors: Has airlifted supplies for its North American truck production.
The Electronics Industry
As with the auto industry, some electronics companies have adopted drastic measures to keep their production lines running.
- Samsung Electronics, which is shifting part of its domestic phone production to Vietnam due to the rapid advance of COVID-19 in South Korea. It is also airlifting parts from China to its Vietnam operations.
- European electronic component distributor TTI says it is using air cargo companies UPS, FedEx, and DHL to mitigate the impact of holdups in China.
The Food Industry
With some of the world’s top gastronomic centres, such as Paris and New York, under stringent lockdowns, a plethora of restaurants and food outlets are cleverly trading on the fact that people still need to eat, despite the bleak conditions.
Their marketing strategy: If customers are not able to dine inside the restaurant, they must be afforded the opportunity to dine outside the restaurant, i.e. at home.
Let’s look at some examples:
- Michelin-guide restaurant The Morris in San Francisco, offers kerbside pickups of its entire fine dining menu, including charcuterie and its signature dish, smoked duck.
- Jacket-recommended restaurant Canlis in Seattle has temporarily closed its elegant mid-century dining room. Instead it is now offering a meal delivery service from its premises: a bagel shop, and a drive-through selling burgers, veggie melts, and its trademark salads.
Having started in China, where stringent measures are in place to prevent unnecessary human contact, more and more companies are offering customers the option of non-contact deliveries.
Companies such as Uber Eats, Deliveroo, Just Eat, Postmates, Takeaway.com, and Glovo have all said they will give users the option to have food left at their front door.
China’s Pharma Delivery Industry
They have since been joined by drone maker MicroMultiCopter and China’s largest private courier company SF Express. Indeed, the use of drones to deliver medical supplies and transport medical samples for analysis is fast gaining pace in the beleaguered country.
When the Going gets Tough, the Smart get Smarter
Airlifting components, shifting operations to less-stressed countries, morphing from fine dining to fine food, non-contact delivery, and using drones—these are just some of the ways smart businesses adapt to the devastating impact of the Coronavirus pandemic.
In the future, businesses will diversify their supply chains and source locally so they are not as dependent on one procurement source as they are now. It takes time to turn a moving ship around, though, so this will not happen immediately.
That said, it’s worth noting—with several governments describing the COVID-19 pandemic as a war with an invisible enemy—that some of history’s most successful innovations have been delivered during wartime.
There’s no reason why that should that not be the case today, especially in supply chain, a sector well used to fast change—and the need to adapt and overcome challenges at pace.
At Logistics Bureau, we have been helping business professionals adapt their supply chains to changing economic and social conditions for the past 22 years. Why not get in touch with us? We have plenty of innovative ideas to help you streamline your supply chain cost and service.
Related Article: The Industrial Impact of the COVID-19 Crisis