Dive Brief:

• Sixty-two percent of procurement and supply chain managers across a range of manufacturing and non-manufacturing industries are experiencing supplier delays due to novel coronavirus-related disruptions in China, according to survey results released by the Institute for Supply Management (ISM) Wednesday. The survey of 628 individuals was conducted between Feb. 22 and March 5, 2020.
• "We saw a spike in companies looking for alternate sources outside of China for suppliers [in 2019]," Thomas Derry, CEO of ISM, told Supply Chain Dive in an interview. "Those companies are definitely much better positioned today, because the other side of the same data we collected showed that there were a lot of companies that took a wait and see approach to monitoring the situation. Those companies today, by and large, are in a really tough place right now as lead times have doubled."
• Seventy-five percent of respondents surveyed said they are currently impacted by COVID-19 disruptions, and anticipate the severity of those disruptions will increase "after the first quarter of 2020."

Dive Insight:

ISM's report found one of the primary challenges for procurement managers is not only managing suppliers (53% of survey respondents reported having problems getting information from their Chinese supply chains) but accessing the containers to move goods in the first place.

"We've got a bunch of stranded container ships in China that haven't been coming to United States and we can't export from here to demand in the China market," Derry told Supply Chain Dive in an interview. "What I've been hearing, for example, is there is a lot of citrus that leaves from California this time of year to meet demand in China and in other places in Asia, and there aren't enough refrigerated containers to send that product over there ... you only have a small window to do that."

Slowdowns at ports, while starting to pick back up, and high airfreight rates are causing experts to estimate that freight flows won't begin to normalize until April.

In addition, newly announced flight restrictions from the EU are projected to shrink air capacity even further.

In the meantime, whether procurement leaders have been prepared for COVID-19 disruption, Derry believes the current situation should be an industry-wide wakeup call to the need for more regionalized supply chains, with supplier backups, and advance scenario planning to increase resiliency in the future.

"I think the lesson that ought to be drawn from this is always that the best price on your part comes with a hidden cost, which is the risk of supply disruption. And companies are realizing, 'Okay, it's a great part price, but if there is a supply disruption having to deal with that can be an issue,'" Derry said. "So, I think you'll see this will be an accelerant to move ... closer to the end customers and ... companies will not be as willing to put all our eggs in one basket."