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Perspectives

How has the coronavirus disease affected your supply chain?

Preventing supply chain disruption during the COVID-19 crisis

Disruptions to global supply chains due to COVID-19 have been heavy. Free movement and operation of people, raw material, finished goods, and factory operations have been stymied. Direct supply chains have experienced challenges, and so have extended supply chain partners such as third-party and fourth-party vendors—the suppliers of suppliers.

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Take action for today’s crisis, be resilient in future ones

To address these issues, organizations should consider deploying a disruption prevention framework across their enterprise-wide supply chain. A robust framework can help you limit downtime in the supply chain, quickly identify alternatives to affected supply chain elements, and position your operational ecosystem not only to address today’s disruption but also to help you prepare for future events once this one passes.

Deloitte’s supply chain disruption prevention framework

Evaluations of supply chain disruption risk should include not only immediate disruptive events, but also the many other factors potentially impacting operations. Such risks, especially unanticipated “black swan” events, can have catastrophic effects. Deloitte’s disruption prevention framework (see below) for supply chains considers these risks and, combined with our deep experience helping clients navigate disruptive events, can help you stay focused on your operational goals.

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Companies face a multitude of risks throughout their supply chains

Exposure to supply chain risk can increase due to:

  • Shortened product life cycles and rapidly changing consumer preferences
  • Increasing volatility and availability of resources
  • Heightened regulatory enforcement and noncompliance penalties
  • Shifting economic landscapes with significant supplier consolidation
  • Increasing demand for transparency and social responsibility
  • Geopolitical risk driven by expanding global footprint
  • Data complexity and heightened data security requirements

Many companies are vulnerable to supply chain risk, with potentially significant impacts, such as:

  • 11 percent revenue at risk for a significant supply chain disruption, if not immediately and strategically addressed1
  • 25 percent average reduction in share price resulting from a publicly disclosed supply chain disruption1
  • 30 percent lower shareholder returns for companies announcing supply chain disruptions compared to the peer group1

 

 

How vulnerable are organizations to disruptions in their supply chains?

  • 98 percent likelihood that a manufacturer will experience a disruption in the next 24 months1
  • 47 percent of companies do not have a strategic backup plan for factory or distribution center shutdown2
  • 51 percent of companies have suppliers that could not continue to supply if they suffered a disaster in one location2
  • 20 percent of companies go bankrupt within 24 months of a moderate-to-severe supply chain disruption3



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A matter of when, not if

The COVID-19 outbreak was unexpected, and its effects are far-reaching. Organizations with contingency plans as part of an extended enterprise risk management strategy are generally better positioned to manage and continue operations through the event than those without such a proactive approach.

When could the next natural or man-made event strike and cause disruptions around the world? No one can predict that with certainty. But by deploying Deloitte’s supply chain prevention framework, organizations can proactively prepare themselves for the worst while strategically positioning themselves for the best. 

Learn more about Deloitte’s perspectives on how organizations can combat COVID-19 with resilience.

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Endnotes

1 "Best Practices in Cyber Supply Chain Risk Management," National Institute of Standards and Technology, 2015.

2 “Managing Risk in the Global Supply Chain,” University of Tennessee Supply Chain Management, Summer 2014.

3 "What’s in your Supply Chain War Room?," Harris Corporation, March 22, 2016.

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Dan Kinsella
Partner
Deloitte Risk & Financial Advisory
Extended Enterprise Risk Management
Deloitte & Touche LLP

Alexander Zmoira
Managing director
Deloitte Risk & Financial Advisory
Risk Intelligence and Supply Chain Risk Disruption
Deloitte & Touche LLP

Bryan Goshorn
Senior manager
Deloitte Risk & Financial Advisory
Supply Chain Strategy & Operations
Deloitte & Touche LLP

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