Following the detection of early cases in China last December, the outbreak of coronavirus (aka Covid-19) has developed into a force to be reckoned with – affecting not just the health of people on multiple continents, but the commercial activities of numerous companies.

For example, manufacturing at Microsoft [1] and Aston Martin [2] has suffered from the outbreak’s disruptive effects on the flow of materials from Chinese supply chains.

Meanwhile, firms in a range of industries from brewing and mining to travel and tourism have registered similar impacts [3] as the virus continues its global march.

In a 25 February thought leadership bulletin, [4] Cranfield School of Management’s professor of supply chain strategy Richard Wilding notes that what may at first have looked like a localised crisis has quickly gone global, “because supply chains are a network”, and firms “are linked by international processes and network designs. And competition, essentially, is not between individual companies but the supply chains they are part of”.

He points out: “Like Brexit, flooding [and] ash clouds, Covid-19 is a test of risk management processes and resilience in supply chains … Companies should map and continually monitor for vulnerabilities in their supply chains in order to anticipate risks and threats and look to widen sourcing locations even if they involve higher unit costs.”

He notes: “Developing new partnerships can take time. China’s manufacturing operations are efficient and technologically advanced – because of local and Western investment – and alternative regions may not have these capabilities.”

Wilding stresses that, just like the KFC IT crisis of 2018 – in which a shift to new software led the fast-food brand’s UK outlets to run out of chicken – “it’s important that lessons are learnt about the fragility of supply chains.”

He adds: “To both customers and boards … it all might look and feel like clockwork, but the reality is [that networks are] a bunch of collaborations involving people, technologies and natural phenomena, any element of which can have problems … The way forward is to admit things will go wrong and build up resilience across entire supply networks during the good times, talking and sharing to create collaboration and trust which will then be invaluable through the hard times.”

Which sorts of leadership skills will help to channel and focus the collaborative behaviours that Wilding cites?

The Institute of Leadership & Management’s head of research, policy and standards Kate Cooper says: “It really depends on whether or not we view coronavirus as a black swan. If we do, then our stance would inevitably be that there was very little any of us could have done to forestall its effects. But even if some leaders take that position, the outbreak still forces us to think about how we manage our personnel.

“Just as we look at succession planning in terms of what may happen if key people unexpectedly leave, or are unable to come to work and contribute to the firm, we must ask ourselves: What’s our backup? Who’s going to step up in our organisations if this virus becomes more of an emergency? That’s the sort of planning we must now build into every stage of the supply chain.”

Cooper notes: “Yes, there’s a cost associated with that planning – and some leaders may think that cost too high. So their outlook will be to carry on, hope for the best and deal with the worst, if or when it happens. And as long as you’ve actually had that dialogue, you can be sure you’ve at least given the matter due consideration, and can have confidence that you’ve made a decision about it.

“However,” she adds, “fundamentally, if you don’t collaborate with your stakeholders amid these sorts of developments, you will make yourself so much more vulnerable. And I would suggest that the key to sustainable business is to identify and target critical areas in which those collaborations can help to make you more resilient, in an organisational sense.”

For further thoughts on the themes raised in this blog, check out the Institute’s resources on engaging stakeholders

For in-depth insights on collaboration, download the Institute’s report Building Collaborative Capacity

Source refs: [1] [2] [3] [4]