While Coronavirus has yet to run its course, COVID-19 already demonstrates a clear lesson in supply chain risk.  Whether reasonable or reactionary, today’s empty supermarket shelves and plunging markets indicate that supply chains are being impacted by COVID-19.  This moment points to the need for supply chain resilience in all organizations: whether endemic panic or actual pandemics.

On a tangible level, hand sanitizer, sold out in stores and auctioned online, exemplifies supply chain failure.  Demand can surpass supply at the manufacturer, distributor, and retailer/sales channel. It can also overwhelm the logistics and transportation capability. In the pharmaceutical and medical industry, the spread of the virus may outpace R&D for developing a vaccine against COVID-19 and the manufacturing of lab tests.

Any of these gaps could cause supply chain failure, causing the consumer or patient to lose out on the product they want or need. When this happens and people think it will cause them harm, people can get really sensitive to which organizations were able to help them and which were not.

The goal of Supply Chain Risk Management (in manufacturing) or Operations Risk Management (in the financial sector) is to address events that cause failure within the system that takes products from manufacturing to the final point of sale. Organizations can reduce the impact of these events by planning in advance and communicating the steps that will be taken in case of a disruption at each step in the supply chain.

The results of risk assessments should help fund capabilities and contingencies to keep business running through tough situations. The most frequent types of situations should be prioritized in risk assessments. But, extremely high impact, low frequency events, like pandemics, should also be considered and made part of contingency planning.

COVID-19 is a wake-up call for organizations to reevaluate their Supply Chain Risk Management or Operations Risk Management plans. What scenarios have your organization not yet addressed? How do your third parties fit in your supply chain? Are you comfortable with their resilience? Do you have contingencies if their part is disrupted?  The answers could be the difference between keeping or losing the hard-earned trust of your consumer.

Shared Assessments will be hosting Enterprise Resilience: The Pandemic Effect, a webinar where attendees will learn from leading experts how resilient organizations persevere in the face of supply chain, manufacturing, workforce and operational disruptions.  Register here.