The coronavirus is beginning to affect global supply chains as Apple’s iPhone factory is due to shut for yet another week. But more businesses may soon be affected than people realise because the global supply chain has become so intertwined and China’s role in it so crucial.
As a proportion of global Gross Domestic Product (GDP), the Chinese economy is four times bigger than what it was during the SARS outbreak, so the impact will be much more significant.
Alejandro Alvarez partner at operations performance at Ayming, a consultancy who specialise in supply chain and operations performance said, “When it comes to supply chains, the ripples of the coronavirus are only just emerging.
“Companies are working on their risk assessment plans, but, in reality, how many businesses can trace all their supplies to source? It’s very difficult to get a full grasp on the matter and many companies could be underestimating their exposure.
“Global supply chains have become incredibly complex and the Chinese economy plays an extremely important role in the global economy so there may be some unpleasant surprises in store should import restrictions and containment efforts escalate.
“For example, a UK manufacturer who imports a certain component or material from abroad might not know the origin of that component – it could easily be from China.
“However, this outbreak actually provides a valuable lesson. As it stands, most businesses are far too dependent on one or two main sources for their supplies.
“Companies must learn from this and build resilient supply chains by diversifying their sources. If a business has a number of suppliers for the same product, they have an insurance policy should things go wrong – and, clearly, things do go wrong.”
A new report compiled by LearnBonds.com reveales that the coronaVirus is projected to be the costliest epidemic since 2000. Data indicates that by the first quarter of 2020, the virus is expected to cost China about $62bn, an equivalent of 2% of the country’s GDP.