As they close offices, send employees home and enact travel bans, businesses around the world are scrambling to deal with the disruption caused by the coronavirus (Covid-19) outbreak.
While the speed at which the virus has spread makes it difficult to know exactly how severe the impact will be, it is becoming clear that the disruption will most likely drag on for at least several months.
From immediate practical problems to the long-term fallout, procurement executives should consider the following scenarios.
Governments in several countries have imposed a shut-down on all non-essential offices and many employers who haven’t been forced to have done so voluntarily. With the number of cases in Western countries continuing to rise dramatically, it seems likely that this could remain the norm for months to come.
Procurement chiefsneed to adapt their working practices to make the best of this – both in terms of organising their own team but also how they interact with suppliers.
One risk professional says: “Work from home is a logical alternative [to keeping offices open] but those arrangements may not have contemplated the numbers that will be required in this situation. Both internal and external infrastructure may not be able to support work from home at a scale that could be required.”
For more complex workplaces, shutting down altogether is not an option: “Our biggest concerns are operational sites, where we provide critical customer support,” says another C-suite executive. “We are splitting call centre teams into two teams to ensure [continuity] if one case is found.”
As a recent article detailed, keeping remote workers healthy and engaged could also prove a challenge
The US has banned citizens of most European countries from entering the country and many other governments have implemented similar measures which could potentially last for months.
Many companies had already placed a moratorium on all international travel. You will need to consider whether it is necessary to cancel, postpone or find an online means of holding internal or supplier-facing events.
“We redirected a sales team off-site event in Singapore earlier this month and instead held a three-hour WebEx to deliver the most important content to our teams,” says one finance executive. “We have cancelled or postponed all APAC customer events and we are now seeing that push out until May. In some cases, we have modified those to online webinar-type formats, which is working out fine.”
The above challenges are just as likely to affect your suppliers, potentially disrupting orders and making it harder to meet with key people and carry out site visits.
“Looking at suppliers and where they are located and assessing the open orders we have with them is something we are doing now on a daily basis,” says the CPO of a chemical business. “We are mapping them, seeing if they are in one of the affected areas and making sure we call these suppliers.”
Companies that have strategic partnerships with suppliers have benefited from being given priority – an arrangement worth considering for those looking to plan for future disruption.
“We’ve taken the approach of getting full transparency on the situations preventing suppliers from operating,” says one procurement executive. “If they can’t get a government’s permission to open, we’re partnering with them to make applications to the government to get special provisions.
“If they can’t get logistic support or special permits to get truck drivers over boundaries, we get the government to meet drivers at the boundary lines. Because of this, we haven’t had any who have not been able to serve us.”
In the longer-term, there is a risk that fallout from the crisis could lead to supplier bankruptcies. Some procurement teams are offering financial support, including relaxed payment terms and interest free loans to help their suppliers cope with the disruption. They also need to plan alternative sources of products if the worst happens.
“We’re concerned about the financial exposure of certain suppliers as they may be faced with cash flow issues, so we are being vigilant and reviewing the possible repercussions,” says the CPO of one electronics company. “We’re trying to help our suppliers by paying certain invoices at an earlier date to make sure that we remain their priority and avoid further supply chain disruption.
Shipping has also become more complex and costly. Some container ships have been confined to ports and air freight capacity has been constrained by carriers cancelling hundreds of passenger flights. There are worries that as the crisis grips Europe, land-based cargo networks could also come under serious strain.
“In Europe we already see road transportation having capacity issues just because the drivers are not there,” says a chemical company CPO.
Coronavirus has already wreaked havoc with the financial markets, dragging down stock markets around the world by historic amounts and provoking emergency responses from central banks. Flight cancellations, restaurant closures and office shutdowns are all expected to have a dramatic impact on the health of the global economy for months to come.
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