What we are hearing in the news is primarily how coronavirus is threatening health, the numbers of infected, how it is spreading and impacting people. It’s primarily the human side the story. And it’s tragic. A disease I hadn’t heard of a month so ago has infected over 30,000 people, tragically killing over 900 and now we have 8 cases here in the UK. As terrible as the human story is we also need to consider the risk to commerce. In this article I’ll add some context and show you why I believe this should be on many (even small) companies radars as a major threat if it isn’t already.

What is Coronavirus? It is a respiratory virus, in many ways similar to the common cold and causes “flu like symptoms.” These include a runny nose, cough, sore throat and more. However for those vulnerable such as the elderly or very young, or those with a weakened immune system the symptoms can become much worse, such as pneumonia or bronchitis. As we all know from the daily news cycle it can kill and at time of writing this over 900 have died, and over 30,000 have been diagnosed including now 8 in the UK.

The numbers are moving beyond SARS which many of us will remember from the early 2000’s but the logical part of my brain is saying it’s still significantly below the document cases of influenza (traditional flu). Flu is reputed to cause between 12,000 and 61,000 deaths per year globally. (Source: CDC). So why the dramatic difference?

Macro Economic Position

There are factories closed in China now that are a significant part of the global supply chain. It’s true some of the initial news about factory closures could be seen as dramatisation with the Chinese New Year celebration being the major reason, but now thats over and many factories are still yet to open.

The automotive sector would appear to be the worst affected with Nissan, Peugeot, Citroen, VW, BMW, Toyota and Honda all impacted. Hyundai is the first car manufacture that has actually had to close some factories outside of mainland China due to lack of parts. (Source BBC 10/02/2020).

Screenshot 2020-02-10 at 15.39.44It’s not only the automotive sector that has suffered. In consumer electronics Apple is impacted with their iPhone manufacturer Foxconn making a case to re-start operations by putting various H&S procedures in place, but as yet they’re still not manufacturing. There are quotes easily found of ‘investor worry’ if this trend continues or spreads outside of mainland China.

 

Forbes has today released an article making to connection between Coronavirus and supply chain issues, and also shows some interesting comparisons too SARS in 2002. It also states it will be a few weeks until we get clear picture on how the measures being taken are preventing the spread of the disease. This implies it may not be until then we have a clear picture on where this will take us ultimately.

If you throw in a multitude of other facts, travel bans, a quarantine period, reduced tourism and many more the overall picture can be one or a real up coming challenge.

At no other time has the saying “If China sneezes the World catches a cold” been more applicable.

A more Local Perspective

What about smaller businesses, what about local businesses here in England, even in South West England?

Last week I was catching up with a relatively new client, one I’ve been working with only for six months or so. The business is a manufacturer, with revenues of between £1m and £2m and sells non-technical products mainly in the UK and little in Europe. They sell about 5,000 of these each year and are growing. When I saw them in October their greatest challenge was expanding the European sales network. Last week their factory in China was closed, didn’t have an opening date and they had less than 6 weeks stock left. The factor had about 2 months ready to be despatched, but this was closed. communication was very poor (felt censored they said)  and they could not gain access to get the stock into a container and start the freight process. This is a small Wiltshire business that has been thriving and are now looking urgently for alternative suppliers. Fast.

Looking at the bigger picture (which is part of my role of course) I can see several ways in which small UK business can be impacted. First, your business no matter how small may source products or components from China already. Whether you purchase from an OEM or tier 1 or 2 supplier is not likely to be relevant. It seems there is s strong chance all may be affected in some way.

Second, you may like me be a service orientated business, with limited supply chain. But if my clients are impacted, then so am I. It may be demand for my expertise increases, it may be pressure on costs increases and I and other service providers feel the squeeze, or worse still are terminated. Either way it impacts.

I meet weekly with 35 other local business owners here in Wiltshire and in a brief presentation to the group on Friday I warned them of the possible changes this may have on their businesses. In the room are a printer, graphic designer, builder, inventor, painter and decorator, social media consultant and many more. If I looked hard enough I suspect I could trace many of their supply chains, or that of some of their clients, to China. It’s often invisible, some might say tedious, but the connection, and therefore the possible impact will be there.

I should clarify my opinion. I am not saying  at this stage Coronavirus is a significant threat to the majority of businesses. However there is enough evidence to believe it will impact many, and in some cases very significantly. Take a fresh look at your supply chain, and that of your major customers and make a judgement call on how this may affect you.

Of course my thoughts are with those worst affected personally, let’s all hope this is brought under control sooner rather than later and this article is redundant as soon as possible.

Written and published by Ashley Hutchison, A&S Business Consultants Ltd 14/02/2020.

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