There are events throughout history that are so impactful, you can classify time as “before the event” or “after the event.” The invention of the printing press. The atomic bombings in World War II. The fall of the Berlin Wall. 9/11. Each changed the global perspective such that society was forced to change with it.
It remains to be seen how coronavirus will ultimately impact the world at large, but it has already exposed potential areas of weakness within the global economy, particularly with regard to global supply chain disruptions, which could dramatically affect wholesale distributors.
The global supply chain, pre- and post-COVID-19
Business prior to coronavirus operated under the assumption that, regardless of isolated disruptions, sourcing materials globally would be relatively unrestricted. This allowed companies to focus on cost as the primary factor when making supply chain decisions.
What we’ve learned in the current global health crisis is that concentrating a large portion of the world’s global sourcing in a small geographical area can lead to a catastrophic ripple effect on sourcing worldwide when disruption occurs.
Wholesale distributors are especially vulnerable to disruptions in the supply chain, as their typical business model doesn’t involve any manufacturing of materials. Many wholesalers add value to the products they distribute by kitting the materials to be sold by retailers, a process which can be greatly affected by supply chain shortages.
Global supply chain disruptions: What can wholesale distributors learn from the impact of coronavirus, and what steps can be taken to mitigate the risk that has been exposed?
1. Evaluate your entire supply chain.
Not just your direct suppliers – map your supply chain in its entirety to assess the risk back to the raw material level. Understanding the upstream supply chain will give you the best insight into weak points in the case of an unexpected event.
2. Understand where your greatest risk lies.
Once you’ve evaluated your upstream supply chain, you may want to make changes to your sourcing to diversify based on geographical location. It may not always be possible, as some items are only found and procured in specific parts of the world, but you might discover some opportunities for diversification that would reduce risk in the face of disruption.
While it’s true that changing or adding a source can incur additional overhead costs initially, the decreased risk of disruption may be worth it in the long term.
3. Develop contingency plans, both internally and with upstream suppliers.
Make sure you have action plans for additional funding and alternate transportation and storage facilities, should an event cause your primary locations and sources to be unusable.
4. Look to technology that enables transparency within your overall supply chain.
Connectivity and real-time data are key to visualizing an end-to-end supply chain and making changes as needed.
We don’t yet know the extent to which coronavirus will impact the global economy long-term, but disruptions to wholesale supply chains are inevitable. Hopefully the impact will be contained and minimal, both from a businesses and humanitarian perspective. But let this serve as a point of enlightenment for businesses.
Wholesalers play a hugely important role in the product lifecycle and, historically, have been laggard when it comes to adopting the latest technological advancements. Assessing and investing in technology that allows for real-time insight and adaptability to changes should be a priority moving forward. Those who are agile enough to anticipate and execute supply chain changes will be better able to absorb global product availability constraints and see greater long-term success.
Supply chain challenges can make for a wild ride. Get advice, best practices, + predictions from top experts HERE.
A version of this post was originally published on LinkedIn, and is syndicated here with permission.
