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Globalization has made the world much smaller, a shift that has benefited

businesses of all sizes and industries. With a diverse global supply chain,
your company can stimulate growth by reducing costs, increasing volume
and improving efficiency. 

But globalization also comes with risks. If your company depends on a


network of suppliers around the world, your supply chain is always
vulnerable to disruption from factors outside your control, like natural
disasters, tariffs, shortages or geopolitical clashes.

Nearly 75 percent of U.S. businesses have experienced supply chain


disruption because of COVID-19, according to a survey conducted between
February 22 and March 5 by the Institute for Supply Management (ISM).
You're probably already seeing repercussions that affect your company’s
labor, materials, transportation or consumer behavior.

The current crisis is a reminder to all business leaders that disruptions will
happen, and we must be prepared with resilient and adaptable contingency
plans. I met with Rodney Manzo, Chief Executive Officer of Anvyl, and
Mike Corbo, Chief Supply Chain Officer of Colgate Palmolive, to discuss
what every business leader needs to know about supply chain management in
this dynamic environment. Here are five steps they recommend taking to
navigate the current crisis and strengthen your supply chain for future
challenges.

1. Plan for disruption.


Unfortunately, threats to supply chains are inevitable. Learn to expect the
unexpected, whether it’s a virus, a storm or a strike. Develop a robust backup
plan — or ideally, several plans — to overcome unforeseen obstacles. When
a crisis affects several areas of the world, it can be difficult to forecast when
and where it will end. Be prepared for several phases of upheaval, and try to
stay ahead of the next chapter. 

“When coronavirus first hit China, we were able to react quickly and turn on
a contingency plan within a day,” said Corbo. “Communication was going
out to plants in Latin America to start making toothbrushes to back up
supplies in Europe, the U.S. and China. But as the virus spreads through
Europe, the U.S. and other parts of the world, China will soon have to pick
up the slack. We were backing up China a month ago, but now China will
have to start backing up other places. Make your supply chain agile enough
to withstand each new stage of a crisis.”
2. Develop different levels of contingencies.
Different situations call for different responses. If your supply chain has a
global footprint, think of your backup plan as a series of contingencies with
spare capacity built in. Create a crisis management team that is responsible
for evaluating priorities, weighing tradeoffs and turning on contingencies,
depending on the current conditions.  

Be particularly vigilant about single-source suppliers when planning


contingencies. In case of emergency, can you keep extra inventory from that
supplier as a buffer? Can you require a single-source supplier to produce in
two separate locations? Make it your goal to always have a backup source. 

“We have different levels we can activate, depending on the situation,” said
Corbo. “If our manufacturing plants in one location are compromised, for
instance, a Level 1 contingency may involve making the same product
— like a certain flavor toothpaste — in a different location. If the situation
escalates and multiple manufacturing locations are unavailable, Level 2 may
mean we don’t have access to the exact same product, but we can get a
similar product from another location.” 

3. Update and test contingency plans. 


A contingency plan should not just be a paper exercise. Make your plans
living documents that you test, evaluate and update several times a year.
Conduct a trial run of your contingency plans in the real world at least once a
year to ensure they are still viable. Note any vulnerabilities or potential
challenges, and commit to resolving them before the next test.   

“Imagine your primary supplier of a particular material becomes unavailable


for weeks or even months,” said Manzo. “Do you have a secondary source in
place? How quickly can you get that supplier up and running, so you have as
little lag time as possible? Test this contingency plan as part of your quarterly
or mid-year business review, asking your secondary supplier to produce and
send a limited shipment to a certain market. The goal is to identify any weak
links before they become real problems.” 
4. Facilitate real-time collaboration and
communication.
Leverage technology to track potential disruptions and share information
easily. Look for steps you can take immediately to improve the visibility of
your end-to-end supply chain and better communicate with your team
members and partners. And begin researching more advanced technologies,
such as those using artificial intelligence or the Internet of Things, to make
long-term investments in your company’s collaboration capabilities. 

“Collaboration among all your stakeholders is crucial,” said Manzo. “When


your whole team has visibility into your entire supply chain, from beginning
to end, you are better equipped to identify trends, forecast potential problems
and find solutions. Explore tools like Slack, Google Hangouts, WeChat,
WhatsApp and other online platforms that can keep your team and suppliers
connected across countries and continents during a crisis.”

5. Stay ahead of demand.


Demand can be unpredictable during a crisis, and you have to be able to track
and analyze it in real time. The demand cycle lags supply disruption, so keep
a close eye on current trends, and follow consumer behavior so you can
redirect product levels quickly based on changes.

“When something like the coronavirus hits and consumer behavior changes,
we need to know as soon as possible,” said Corbo. “What we’re seeing now
is an uptick in demand in the U.S. People are buying a second one of
everything — toothpaste, liquid hand soap. All major retailers in the last few
weeks have, without any warning, said they want to increase their inventory
levels by a week. That is going to affect the supply chain. We’re in the
middle of trying to cover other things when, all of a sudden, here’s a bunch
of demand we didn’t expect. You must be somewhat nimble to be able to
change even when you think you have a situation covered.”

The current health crisis is still unfolding, and its full impact is yet unknown.
But you can take steps to reinforce your supply chain and develop your
contingency plans to safeguard your company against other serious
disruptions and prepare for the next crisis.