A look at the Coronavirus and your global supply chain

You’ve probably heard the news…about 100 deaths from Coronavirus so far, and the death toll is climbing. The city of Wuhan, China, with a population of 11 million, has been sealed off and locked down – no in-or-out transportation. 

All public gathering places and factories are closed. All Chinese New Year public celebrations have been cancelled. Supply chains in and out of the area have come to a screeching halt. Many countries, including the U.S., are evacuating their citizens from Wuhan and other cities.

If you are sourcing or manufacturing in China, consider this:

• The incubation period is 14 days and during this time the virus is contagious. If you have recently traveled to Wuhan or know someone who has, be alert for symptoms
• The virus is spreading around the world with cases identified in the U.S., Europe, Australia, and throughout Asia
• It is unknown if the virus is transmitted only by people, but also by animals, on surfaces, and objects – some companies have already triggered testing of products and parts that have been shipped from Wuhan, for any signs of contamination
• The U.S. Department of State has issued a travel warning for China and Hubei Province in particular, and has evacuated all non-essential personnel

Wuhan, China

Wuhan, one of China’s industrial hubs is home to its steel industry. An inland city, about 500 miles from Shanghai, Wuhan is a manufacturing center for automotive companies including Nissan, Honda, and GM, and other corporate hubs including IBM, HABC, Honeywell, Siemens, and Walmart. Wuhan’s manufacturing significance has grown over the past 15 years because as an inland city, it can draw labor from the surrounding area at lower cost than migrants traveling to other manufacturing areas of China. The overall cost of living and operational costs are also lower than China’s eastern seaboard factories. These economics have drawn large corporations and whole industries to develop manufacturing sites in Wuhan. Airports, railways, trucking, and logistics services are also excellent.

Parts of your supply chain may originate or pass through Wuhan for manufacturing, assembly or finishing. If so, you can expect wide-spread shortages or delays for materials sourced or manufactured there. The length of the lock-down in Wuhan is unknown and your global supply chain for raw materials, parts, or finished goods may be at risk.

Plan B and Plan C

If you haven’t already started working on an alternate sourcing and manufacturing strategy that excludes China, you should start immediately. Propelled by the Trump Administration Trade Wars, many companies have already left China for other Asian manufacturing locations. But - there are no guarantees that the virus won’t spread to these new locations. 

The Coronavirus should be a serious wake-up call for supply chain professionals to develop several alternate sourcing and manufacturing plans in different regions of the world, in response to all kinds of world events. While natural disasters and events such as the Coronavirus cannot be predicted, you can develop alternate plans in case they do happen. Start now. Have a Plan B and a Plan C – just in case.

Rosemary Coates
Ms. Coates is the Executive Director of the Reshoring Institute and the President of Blue Silk Consulting, a Global Supply Chain consulting firm. She is a best-selling author of: 42 Rules for Sourcing and Manufacturing in China and Legal Blacksmith - How to Avoid and Defend Supply Chain Disputes. Ms. Coates lives in Silicon Valley and has worked with over 80 clients worldwide. She is also an Expert Witness for legal cases involving global supply chain matters. She is passionate about Reshoring.