History has a bad habit of repeating itself, and over the past few days, an ever-present supply chain risk reemerged: the outbreak of a new infectious disease. In this case, swine influenza appears to have started in Mexico and is quickly spreading to other places around the world, including the United States, which formally declared a public health emergency yesterday (see Department of Homeland Security press briefing).
And the impact on supply chains has already begun: Russia is banning all meat imports from Mexico and the southern United States, and China is banning meat from Mexico, California, Texas, and Kansas. Considering that Mexico is the United States’ second largest trading partner, I expect this outbreak to affect many other products and supply chains if the situation in Mexico worsens. When Severe Acute Respiratory Syndrome (SARS) struck Asia in 2003, many supply chains were significantly affected, especially in the high-tech industry. Motorola, for example, shut down its plant in Singapore when one of its employees became infected. If an employee at one of your suppliers or customers in Mexico becomes infected, what do you think will happen?
Simply stated, if your supply chain team is not holding an emergency meeting this morning (or held one this weekend) to analyze this risk and its potential impact on your company and trading partners, you are setting yourself up for potential hardships in the days and weeks ahead.
Then again, if you didn’t learn your lesson after 9/11, the SARS outbreak of 2003, the Bird Flu, and Hurricane Katrina, and you haven’t developed risk management and business continuity plans by now, there’s probably little you can do to mitigate the potential impact of swine flu. Developing a “resilient enterprise” does not occur overnight, as Yoffi Sheffi made clear in his 2005 book, “The Resilient Enterprise.”
In the book, Sheffi writes that “businesses should assume that governments are likely to ‘over-react’ and take strong measures in case of high profile public disruptions, such as another terrorist attack, SARS epidemic, or other anxiety-producing disruptions.” The actions taken by Russia and China are just the tip of the iceberg; you can bet other countries will take similar actions this week.
If supply chains hate uncertainty, then there’s probably nothing worse than an infectious disease outbreak to raise uncertainty to a whole new level. “There are some things that [are] important [for] people [to] understand: Flu viruses are extremely unpredictable and variable,” is what Dr. Richard Besser, Acting Director, Centers for Disease Control and Prevention, said at yesterday’s press conference. “And so over time, what we say about this and what we learn will change.”
What should you do in the days ahead? Stay informed of the actions being taken by countries around the world in response to this outbreak. Stay in constant contact with your trading partners, especially those in the countries already affected, to coordinate your activities and develop contingency plans.