The disruption caused by the coronavirus epidemic has exposed serious deficiencies in the supply chains of global tech giants. Their reliance on Chinese companies for the assembly and production of their products has intensified the effects of covid-19.
Coronavirus will have major implications for the bottom-line of companies. Our research found high tech companies’ will be one of the worst affected as costs for inventory, logistics, manufacturing and sourcing could increase 24%, on average growing to $1.61 billion, according to analysis of data from +750 clients around the globe if the coronavirus-related disruptions ease by the end of the month.
While a lot of the focus has been on the short-term supply chain challenges, in the long-term the impact will be felt by consumers as it is expected there will be a wave of further product delays, shortages and cancelled events. This is not the first time Asian supply chains have been shaken, similar issues arose around the 2003 SARs outbreak, 2011 Tsunami and more recently the China US trade wars.
However, this case is more unique, in that a majority of companies’ contingency plans involve other sources of supply from within mainland China. In the aftermath of the epidemic companies will be left asking what went wrong. We urge businesses to strongly consider robust contingency planning with secondary and backup sources of supply on different continents to assure a flow of critical components when unforeseen impact a source country.