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The lessons of COVID-19

By: Nancy García Bacilio, correspondent in Mexico for El Empaque + Conversión

Actors on the international industrial stage face the challenge of strengthening their supply chains, so as not to stop their companies and avoid, above all, empty shelves.

Europe, Asia, Canada, and the United States have become the focus of a global infection that affects the rest of the population in health and economic terms. Forced quarantines, the closure of borders, and the restriction of sea, land, and air transport, have disrupted their industrial production, and the situation does not look better for Latin America.

Governments have implemented several measures to counter the pandemic, such as mandatory confinement, closing borders, increasing social aid, financial support for small and medium-sized companies, and postponements of public events such as concerts and political elections. Additional measures include preventing entry to those who come from China or Europe, suspension of classes, the prohibition of mass meetings, the closing of restaurants and bars, remote work, restriction of international flights, delay of payments for services, and even suspension of non-essential industrial work.

The almost paralysis of Latin America affects industrial and commercial synergies, as has been seen in other continents. However, not everything is a loss, because crises are an opportunity to increase our knowledge of how to deal with situations that limit industrial work by disrupting the supply chain on a large scale.

Impact on the supply chain

Goker Aydin and Tinglong Dai, experts in operations management and business analysis from Johns Hopkins University, consider that the global effects on supply chains are the result of COVID-19's impact in China since the country is one of the primary sources of components and finished products. 

The longer your plants remain inactive, the fewer parts and components for different products in the world, which, in the short and medium-term, can lead to the definitive closure of several companies due to lack of supplies.

On the other hand, the current crisis has rethought storage systems as an aspect that companies must consider, since consumers highly value the availability of products in times of crisis, resulting in empty shelves due to compulsive buying. Small and medium-sized businesses are vulnerable because storage creates variability in its demand, which is difficult to absorb as it does not have the level of scale and flexibility required to maintain a reasonable degree of product availability.

Centralized procurement, better inventory control, and diverse supply bases are strategies that help proper storage management.

Goker Aydin believes that there have been disruptions to the global supply chain in the past. Still, so far nothing like COVID-19, its scope in the number of people affected, the geographic impact, and how long it has lasted. It seems to be a unique event in recent history.

The lessons of the pandemic

After a disaster and the resulting disruptions, there is a kind of balance of how risk is managed. Until the early 2000s, supply chains spread across this world as manufacturing shifted to cheap labor, and they also became more agile, due to the short life of some products such as items. Past crises have taught that a disruption in the supply chain can deprive the production of the necessary inputs. They have also shown that a resilient supply chain must be able to detect early warning signs of an outage and respond by shifting to alternative sources.

Companies that rely heavily on suppliers or consumers located in regions affected by COVID-19 should consider diversifying their supply bases. It takes a lot of serious effort to get more reliable supply chains. For specialists, one way to achieve this is by expanding the supply base to obtain independent sources, so that when one set of providers may be inactive, the other is working.

Actions to mitigate the impact of the crisis

For his part, Nick Vyas, executive director of the USC Marshall Center for Global Supply Chain Management, believes that there are strategies that can help mitigate the impact of a crisis on industrial production based on experiences of past natural past disasters.

He emphasizes that the welfare and safety of employees must be sought above all, as it is the company's most valuable resource. Do not believe everything the government says and find out from sources close to the events because official information tends to be mild.

Expect the unexpected; it is not advisable to wait for a crisis to arise to act. It is almost a fact that due to the new coronavirus, there will be limitations in the supply chain, so it is recommended to analyze hypothetical scenarios to assess the impacts and the alternative solutions.

Create a comprehensive emergency operations center not only at the corporate level but also in the production plant to streamline communication within the company and coordinate the actions to follow. Also, designate roles and protocols that help them make decisions that involve clients and suppliers to create business continuity plans that identify contingencies in critical areas and include backup plans for transportation, communications, supply, and cash flows.

Palabras relacionadas:
COVID 19, coronavirus, coronavirus impact on supply chain, global effects on supply chains, inventory management, coronavirus packaging supply chain, impact of coronavirus on the packaging industry, operations management, disruptions to the supply chain, lessons of covid 19

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