Jack Buffington is an expert in supply chain management. The professor of the practice at the Daniels College of Business is passionate about the opportunities for supply chain innovations to address business and societal challenges. We asked Buffington some questions about the outbreak of the COVID-19 coronavirus disease and how it relates to the need to innovate the supply chain systems in the U.S.
What is the size and scale of the problem?
According to a few estimates, the impact to the global economy could run in the hundreds of billions to one trillion dollars. The SARS virus’s impact to the global supply chain was approximately $60 billion 17 years ago when China’s economy was ten times smaller and less sophisticated than it is today. The coronavirus seems to be less fatal than SARS but more prolific, spreading faster and easier on surfaces.
What kind of industries are most at risk for disruption?
Wuhan is one of China’s largest manufacturing hubs, especially in automotive, but also houses regional operations in China. As a nation, we are dependent on China for crucial societal supply systems in medicine, healthcare supplies, automotive, advanced electronics and even the military. This is not just dangerous from a domestic security standpoint, but is also short-sighted to the importance of emerging industries of innovation that will increasingly demand obsessive agility and resiliency.
It is important to note that multinational firms are suspending or impacting their operations in other cities, and the impact is larger than China given that it’s possible for the virus to live on the surface of something and then transmit. There’s a lot of uncertainty, which leads to risk mitigation, therefore, slowing supply chain activity.
How problematic are new clusters of the disease, in countries like Iran, South Korea and Italy?
There are the medical concerns that are different from the supply chain ones. I think the supply chain concerns can become a more dangerous domino effect of slowing global economic growth and activity. While I’m not a medical doctor, it seems as if the virus itself will begin to be brought under control, at least from a fatality standpoint. But from an emotional and cultural standpoint, it will have a greater effect on global supply chain activity.
This raises the questions of how resilient our global supply chain is versus what it needs to be. I think this will be an inflection point for how we need to build more resilient supply chains in the 21st century to withstand these events, versus a model of efficiency that has such large failure points of concentration like manufacturing in China.
What should businesses and industries do differently to manage these kinds of supply risks?
Build resiliency in their supply chains to not be overly dependent on one region or country as is the case today. Our supply chains need to adapt to a 21st century model.
Companies that continue to model their supply chains with a single-minded obsession toward short-term profit should be dis-incented and new companies and supply chains should be motivated to shorten the long-tails of our present supply chains, not just as a matter of national security and well-being, but innovation as well.
The Daniels Communications Team is doing several Q&A’s with faculty to provide timely insight on the impact of the pandemic. If you have questions you’d like answered, feel free to email us at firstname.lastname@example.org. We will have ongoing topical blog posts in the Daniels Newsroom. Here are two others that might interest you: