February 17th, Apple warned their investors that it will fall short of their guidance due to impacts of the COVID-19 coronavirus on both iPhone manufacturing and overall Apple sales in China. When a company as massively resourced as Apple brings their supply chain issues to light, the rest of us are best warned to take a look to see how we might be impacted. Unfortunately, many companies will find themselves looking only at the first tier of their supply chain, the company that they contracted with for goods or services, unable to see whether the companies that their first tier suppliers depend on have extended supply chains in China or other affected countries.
The ugly truth is that the Coronavirus’ brutal world tour is not over yet nor are the supply chain disruptions caused by the virus – this is what Interos calls the Ripple Effect – the proliferation of disruption through the supply chain, from the 3rd, 4th, 5th tiers and beyond. Examples include drug companies reporting (Wall Street Journal) interruptions to their supply chain, and reports of stockpiling by other countries that are part of the US drug supply chain (Modern Healthcare). The ripple effect is not necessarily the first thing companies think about when discussing supply chain interruption, but understanding it is an essential part of minimizing impact and accelerating recovery.
The root of the problem is that – except for our customers, no CEO, chief procurement officer, chief risk officer, chief operating officer knows as much as they need to know both about risks they think are managed or about unmanaged risk in their supply chains. While many 10k reports attest that adequate supply chain risk management is in place, it takes Coronavirus to make clear that what they think they know “…ain’t so”.
So set your alerts on Interos. I’ll be posting about 4 short term steps to improve your supply chain risk posture to get ahead of the ‘next’ Coronavirus.
Tomorrow we’ll get started with this 4-part posting focused on ‘Know your suppliers and their supplier and so on, and so on….’