Monday 3rd Aug 2020 - Logistics & Supply Chain

It’s catching

One of the perennial fears of a columnist on a monthly publication is being overtaken by events. What seems relevant – even wise – at the time of writing, sounds passé by the time it is read.

It’s bad enough when you’re dealing with the business world, but who knows what havoc a medical pandemic could cause? So it is with some trepidation that I approach the question of avian flu.

Logistics professionals may well think they can leave the furrowed brows on this one to politicians and medical officers of health. Not so. If a pandemic strikes, logistics will be in the thick of the action.

If the worst happens, I see three main trouble spots for logistics.

The first is the most direct – the fall-out from being the unlucky firm that happened to move the cargo ofpoultry or whatever that carried the disease into a country. Plainly, there are certain high-risk areas not every logistics operation will encounter. But those that do should revise their risk analysis immediately. They should bone up on the potential dangers, how to spot them early, and what to do in the worst case. They should assess risks from customers, especially if they are moving cargoes in or around Asia or other hot spots.

Reputational damage
Should a serious outbreak of avian flu be traced to a consignment of, say, poultry a carrier has brought into Europe, the big problem could be long-term reputational damage. Officials – and certainly the media – are going to want to know what checks were made before accepting the consignment.

Logistics managers must be ready with a contingency plan to deal with both the immediate impact of this situation on its fleet and staff, and the effect it might have on other customers. It’s probably not too alarmist to suggest putting some contingency crisis management planning in place to game-plan scenarios. Companies that suffer worst in a situation where something serious has gone wrong are those that don’t look as though they’re in control in the first 48 hours after the crisis strikes. It’s vital to know what to do and to be seen to be doing it.

The second general problem a bird flu pandemic could cause is a restriction on movement. Exactly how restricted movements would be would depend on the severity of the outbreak. Probably there would be no-go areas for general deliveries, or deliveries might be restricted to essential supplies.

For depots or warehouses that suddenly find themselves in restricted areas this will, of course, be a big problem. Some companies already have plans in place to deal with a depot or warehouse being put out of action by a fire, for example. These plans will be useful as a guide as to what to do if they turn out to be in a restricted movement area. Those companies that don’t have contingency plans will find themselves making it up as they go along, with predictable consequences.

Economic impact
The last issue is the impact an extended pandemic would have on the wider economy. Economic growth in many parts of Europe is already fragile. If thousands were catching flu, it wouldn’t take much to keep consumers at home and to stop them spending.

The typical economic model for this is a sharp collapse in spending followed by a slow recovery. How sharp, how slow depends on the circumstances. The point for logistics is that the initial collapse would see inventory building up rapidly back up the supply chain. That would create a raft of problems – the saleability of product languishing in warehouses, the availability of storage space, and profitability being hit by written-off stocks. If the downturn is severe or lasts longer than expected, there could also be problems with shorttime working and lay-offs.

If there is an economic shock of this nature, it will obviously affect all the businesses in whatever country is unfortunate enough to be at the centre of it. No doubt the government in question will take corrective action through monetary or fiscal measures. Trouble is, such measures take time to work through and won’t have much impact if consumers are afraid to go out.

So, if the worst happens, logistics shouldn’t expect too much outside help. The best defence is to be ready.

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