Preparing for avian flu pandemic

Paul Hampton, Northern Europe marketing director for Ariba, analyses the effect avian flu could have on supply chains.

Imagine the scenario - a contract manufacturing worker in China goes home sick with a fever and sore throat to his farm. His family, alerted by months of government warnings about bird flu, sends the worker off to the local hospital. But the ordinary flu he caught at work has mixed genetic material with the avian flu he picked up on his farm. Before doctors can admit him, he infects hundreds of people, each of whom will infect hundreds more, among his family, in his workplace, his village, the bus and the hospital. The next worldwide pandemic is loose.

The chance of bird flu mutating into a human transmissible form is small, but if it happens, the ability of existing supply channels to get critical cargo to the right places at the right time will be very much tested. The ceaseless global search for cheaper sources of labour, components and goods, coupled with technology-enabled transportation networks that move goods across more borders, distribution facilities and customers, have created highly efficient but increasingly brittle supply chains that could be devastated by such a pandemic.

A bird flu transmissible from human to human, rather than bird to bird as now, or bird to human as happens rarely, would pale the current disruption by comparison. Public health officials say the human death toll could range from 30 to 300 million. Affected regions would be quarantined; borders would be sealed, transportation would cease. The impacts will be magnified if multiple areas of contagion are identified. Ports would close. Employees might stop coming to work. Not only supply, but also demand for many non-essential items would dry up. Worldwide recession could follow a worldwide flu.

Some lessons can be drawn from industry's experience with SARS. About a thousand people worldwide died from severe acute respiratory syndrome, which debuted unexpectedly in China in 2002 and reached as far as Toronto before apparently burning itself out in 2003. In its wake, SARS sent a shudder through Asian economies. Unprepared high-tech companies scrambled for scarce air cargo capacity as authorities attempted to limit the disease's spread. Many seeking capacity on spot markets were disappointed and had to find transportation through Europe to skirt quarantines in China and Vietnam. Like SARS, a human bird flu pandemic would likely hit industries unevenly.

Supply chains with highest turnover, such as food, would be affected more quickly and severely than those handling clothing. Some supply chain effects would be determined by the means and speed of disease transmission. A flu that could be contracted only by human touch would have dif-ferent supply chain impacts from one transmissible by a sneeze. No one knows how human bird flu would be transmitted, but during the SARS outbreak retailers asked foreign buyers and long-distance carriers to sign waivers specifying which foreign countries they had visited. Companies also leaned on technology for help. During SARS, retailers hesitant to send buyers overseas arranged teleconferences online instead. An effective sourcing system can help businesses identify alternative supply routes.

Every company should have a business continuity plan. Businesses must evaluate its supply network and assess all possible services. Industry needs to be prepared to carry on through a flu that could reduce the workforce by as much as 30 per cent. Big companies should begin reviewing sourcing contracts and labour allocation to assure resources can be deployed rapidly where they are needed. Companies should explore diversifying its sources of components or manufactured goods, so they have a fallback in case a country has to close its borders, or negotiate contingency agreements with carriers in the event a route or a mode of transport is put off-limits.

Planning, visibility of suppliers and robustness of these agreements is the first order of businesses to assure supply chain flexibility and resilience. If you wait for the emergency itself, it'll be too late.

Paul Hampton, Northern Europe marketing director for Ariba

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