Coronavirus and its impact on trade: How prepared for pandemics are we?

Industry News | | MIC Customs Solutions |

The coronavirus outbreak has highlighted how bioshocks can impact heavily on trade, but extra contingency planning could help.

The World Health Organisation has already declared the outbreak of novel coronavirus a public health emergency of international concern, and there are now fears that it could soon be classed as a pandemic.

Although this isn't proving to be a particularly deadly virus medically (deaths from seasonal flu still far outweigh it), coronavirus is already having what could be seen as a pandemic-level impact on trade and the global economy.

That's because, even as China attempts to ramp up production to stave off the impact of factory closures and isolation measures over the past few weeks, new figures for February 2020 are expected to reveal a significant decline in factory output as quarantine regulations begin to disrupt supply chains.

And going forward, the implications of any prolonged disruption to Chinese production could be severe for those companies relying heavily on their Asian supply chain links.

Beginning to impact upon supply of products

Unfortunately, the 'just-in-time' production method and a reliance on China's factories for not only finished goods but intermediate products too means global manufacturing can be hit hard by any unforeseen shocks like this.

Indeed, global financial markets are seeing some of their sharpest falls in years this week amid fears of an economic slowdown, while some major companies have admitted they are having problems as cases of coronavirus rise.

Logistical problems becoming a major headache

Jaguar Land Rover in the UK said it may soon run out of car parts at its factories, while Apple warned of potential iPhone shortages due to its Chinese factories being closed.

Shipping companies moving goods from China have been forced to reduce their number of seaborne vessels and some ships are finding it difficult to get into Chinese ports, CNN Business reports.

Peter Sand, chief shipping analyst at international shipping association BIMCO, told the news provider a number of container ships have been left idling in quarantine zones at sea until officials at their intended destinations can be sure crew members are virus-free.

Some countries are imposing extra security measures too, including Singapore, which now requires all vessels that have docked in China to submit a health declaration form on top of their usual customs paperwork.

Airborne freight is also feeling the impact, with logistics group DHL reporting "severe disruptions" to shipments. 

Analysts are predicting a heavy toll on industries such as pharmaceuticals, automotive and high-tech manufacturing - and with data from the United Nations Conference on Trade and Development showing China is home to seven out of ten of the world's busiest container ports, it's not hard to see why.

What can be done about emergencies like pandemics?

Despite most businesses being likely to have contingency plans in place for emergency situations such as power outages and severe weather, this kind of infectious disease scenario (which could be prolonged) could catch even the most organised companies on the hop.

So, is there anything that can be done, particularly for those that trade globally? Insurance provider Marsh told Insurance Business magazine that it is essential to take the time now to review any existing crisis response strategies and plans.

The World Economic Forum also stresses that any business investing in strategic, operational and financial resilience now will be better positioned to respond and recover should the epidemic continue to impact on global supply chains.

Sensible steps to take may be to examine supply chain exposure to outbreak-prone regions and reconfigure regionally so supplies can still be obtained in the event of a long-term break in production. Indeed, many companies could now be rethinking any single-sourcing strategies they had been working from in favour of obtaining imports from a wider geographic area.

It may be necessary to stockpile essential supplies from at-risk countries, or to examine workarounds using other partnerships - ironically, something that might already have been happening due to recent trade wars and tariffs.

Many analysts are also advocating the benefits of a self-driving supply chain using artificial intelligence and machine learning that would act to prevent catastrophic supply shortages before they become a problem.

Coronavirus could already be having an impact on your supply chain, but the negative effects may be reduced in the long term by taking action as soon as you can.