Coronavirus: Impact on Business

Ravi Anupindi is a professor of technology and operations and faculty director for the Center for Value Chain Innovation at the University of Michigan’s Ross School of Business. He discusses how companies can deal with the COVID-19 outbreak.

What can companies do right now to deal with supply chain interruptions?

Anupindi: It is important to recognize that virus outbreaks are different from other types of disruptions like fires, floods, and earthquakes.

COVID-19 (and other virus outbreaks), depending on the scale and severity of the event, prevents people from coming to work and disrupts supply chains. Unlike natural disasters, viruses like COVID-19 spread geographically, making the scale of supply chain impacts highly unpredictable.

A primary type of impact, beyond people’s health issues, is disruption in supply. China is intricately linked into global supply chains. If factories in China cannot produce because people cannot come to work and/or transport links (freight movements) are also affected, then production in the U.S. that depends on parts from China will halt.

Unlike mostly supply side impacts of other types of disruptions, COVID-19 also has an enormous impact on demand, for example, if cities are under lock down then retail sales plummet and consequently demand drops affecting company sales.

Companies need to activate their supply chain risk management teams to be alert to global developments on the spread of the virus, regions being impacted, and actions being taken by global bodies like the WHO, CDC, national, regional and local government actions, and how these may affect their own supply chains. Based on these assessments, companies need to develop contingency plans to ensure supply, for example, begin to resource from regions unaffected by the virus spread.

How can people and companies prepare?

Anupindi: On the people side, possible steps companies can take to enhance their preparedness and response include:

• Educate and communicate with employees (facilitating information and resources that employees can access).
• Take a risk-based approach to allow employees to come to work when necessary and permitted, and facilitate telecommuting where possible.
• Ensure facilities have basic precautionary measures that employees should take, including availability of medical consultation and advice for emergency response.
• Coordinate with relevant external — health care and government — organizations.

What can the federal government do (or should stop doing) to help?

Anupindi: The government should expedite its pandemic readiness to control spread of disease and minimize impacts; make sure that timely information is available to all, including businesses; and ensure that critical infrastructure needed for society and businesses to function are running.

It should be careful not to panic and take drastic actions, unless deemed necessary that could have severe impact on businesses (for example, lock down a region), close borders, shut down trade lanes, etc.

Ravi Anupindi is the Colonel William G. and Ann C. Svetlich Professor of Operations Research and Management; Professor of Technology & Operations; and Faculty Director of the Center for Value Chain Innovation at the University of Michigan Ross School of Business.

Media contact:  Nardy Baeza Bickel, nbbickel@umich.edu