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ASCM Insights

Coronavirus Outbreak Reveals the Weakest Links in the Supply Chain: the Supplier’s Supplier

By Michael Larner

The impact of coronavirus is both global and unpredictable. The supply chain shock it is causing will cut into worldwide manufacturing revenue of $15 trillion, according to global tech market advisory firm ABI Research’s “Supply Chain Trends and Technologies in 2020” application analysis report.

The virus will have both short- and long-term ramifications for manufacturers. Initially, plant managers and factory owners will be looking to secure supplies and understand constraints further up the supply chain. In the longer term, they will need to conduct an extensive due diligence process to evaluate their risk exposure, including the operations of their supplier’s suppliers. In the meantime, in order to mitigate supply chain risks, manufacturers should not source components from a single supplier or source from suppliers in a single location.

ABI Research also forecasts that the supply chain impact of COVID-19 will spur manufacturers’ spending on enterprise resources planning (ERP) to reach $14 billion by 2024. While many ERP platforms include modules for inventory control and supply chain management, in light of the outbreak, manufacturers also will turn to specialist providers. Supply chain orchestration requires software to be more than a system of record and provide risk analysis and run simulations, enabling manufacturers to understand and prepare for supply chain shocks.

Industry 4.0 also is receiving much attention; however, the focus has largely been on the activities inside the factory gates. But investments in robotics, internet-of-things sensors and the like assume that assembly lines receive a steady flow of raw materials. The new normal of COVID-19 demonstrates that manufacturers need to be as focused on their supplier’s capabilities as they are on their factory floors.

Learn more and find the full Supply Chain Trends and Technologies in 2020” report here.

Michael Larner is principal analyst and part of ABI Research’s End Markets Team. His research focuses on automated material handling, robotics, artificial intelligence, digital workforce enablement, connectivity technologies on the factory floor, and the internet of things in warehouses and factories. Larner may be contacted at larner@abiresearch.com.

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