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Just one in three suppliers in a global survey said they are fully operational as the coronavirus that causes COVID-19 forces workers to stay at home and shutters stores, offices and manufacturing sites.
The survey conducted by RapidRatings between March 2 and March 18 fielded more than 1,300 responses from private companies across industries that included metals, chemicals, textiles and services. Most of those surveyed come from the countries that have been hit hardest by the virus, including Italy, China, South Korea and Japan, as well as from Europe and the U.S. About 57% said they are partially operational.
Not surprisingly, small businesses, defined as having annual revenue of $10 million to $100 million, are faring worst, with 76% reporting that they are not able to operate at full capacity. A third of respondents said they are experiencing disruption to their own supply chains.
“We are only just starting to feel COVID-19’s impacts on supply chains,” said James Gellert, CEO at RapidRatings, a data and analytics company that assesses the financial health of private and public companies.
“Despite business continuity measures in place, many companies expect significant degradation in their ability to deliver in the foreseeable future. These survey results give a first-hand perspective on the difficulties private companies around the world are facing, and they are extreme.”
Of the companies that have already shut down facilities, 42% are not expecting to open again for two to four weeks, while 15% are expecting to wait at least another month. China is being especially hard hit, with 40% of companies surveyed in that region closing facilities.
“Despite business continuity measures in place, many companies expect significant degradation in their ability to deliver in the foreseeable future. These survey results give a first-hand perspective on the difficulties private companies around the world are facing, and they are extreme.”
In the U.S., where many companies have adopted “lean” manufacturing strategies that involve lower inventory levels, there are growing concerns about the length of time it will take for companies to fully recover. The majority, or 59%, of U.S. companies said they do not have enough goods in stock to continue shipments for more than two weeks after closing a plant or facility.
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Globally, companies are only slightly better positioned to deliver shipments, with 47% expecting to face disruption within two weeks of factory closure.
That 47% statistic is the “most poignant” from the survey, said Gellert, who views it as a sign of how much less resiliency there is in supply chains in the age of lean manufacturing.
“For Fortune 1000 and other large companies it’s critical to know which Tier 1 suppliers are at risk, but also that their Tier 1 suppliers have a deep understanding of their own suppliers and so on. In supply chain, “sub tier” visibility has been an increasingly important topic. Now a supplier three tiers down in a supply chain may shut the flow off well upstream and cause massive business disruption and reputational damage for the end customer downstream.”
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The survey found that 62% of companies have a pandemic response policy, but very few are actually set up to maintain full productivity under the “social distancing” guidelines that have been recommended by health care experts as needed to stop the virus spreading.
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Other findings include:
• In China, only 26% said they could be fully operational while working from home as compared to 37% in North America. However, in China only 7% said they could not operate at all, as compared to 15% in North America.
• There have been challenges at 27 % of companies in acquiring masks or cleaning supplies. In Italy, 44% reported challenges.
• 82% of companies in the U.S. reported that their customers were being helpful with COVID responses, higher than in Italy and China who were both at 63%.
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