Wave effect of Covid 19 on Supply Chain

It was February 2020 and companies were figuring out what was Covid 19. All that Supply Chain practitioners were able to decode was that their suppliers in China had suspended operations for a while due to a novel virus which had spread in the country. At that point in time, the rest of the world was producing and customers buying. And that was good news. The bad news was Supply constraints were envisaged to be the bottleneck to run the business, as usual. 

Naturally there was a frenzy of an activity to get material from China. Panic buttons were pressed, predominantly by the Senior Management driven through the lenses of loss of business in absence of material, so additional quantity of purchases were approved as well as premiums were paid for logistics arrangements. Purchase Managers were working overnight, cajoling their China suppliers, figuring out how to get the inland transportation organized within China and a lot of work went into ensuring that the goods leave the shores of China. Many of the buying organizations some how did creep under & by February the Purchase Managers were breathing a sigh of relief as they did succeed to get goods dispatched from China.

An organization which lacked Supply Chain Risk Management practice has since then learnt some lessons the hard way.

Moving into March 2020, the world realized that the issue of Covid 19 is trans-geography & its geometrical growth is beyond grasp & control. The only way to deal with that is to tremendously slowdown the pace of life which has resulted into reducing economic activity. By mid March 2020, Supply Chain "Operations" in many countries came to a stand-still. So now the material which had left China, either by sea or had arrived by air, couldn't get cleared at the importing port as most of the countries have gone into a lock-down either as an entire country or borders have been sealed in parts of geographies. Net result has been that material may be now either lying idle at the port, or is on the road but not able to cross state boundaries or is within the company premises but is not getting converted into a finished product due to suspended operations. Supply Chains of many companies have faced as double whammy - on one side it has increased input material available and on the other side either its manufacturing is suspended or its Finished Goods are not passing further in the sales channel.

By end of March 2020 & early April 2020, many buying organizations have realized that China has resumed operations & now the Suppliers in that country demand honoring the purchase contracts issued by buying organization. Purchase contracts may have been a result of the February 2020 panic buying or yearly contracts whose delivery schedules fall in the coming months.

In my opinion, we have only seen the first of the three waves which will unfold where Input material till Manufacturing wave of Supply Chain has unfolded till now.