- The COVID-19 crisis will bring the supply chain into the C-suite even more than it already is, said Tim Ryan, U.S. chairman and senior partner at PwC, on a Monday call with media.
- In a survey of financial leaders conducted the week of March 9, 34% of CFOs said supply chain issues are among their top three concerns in the current climate. A potential global recession, waning consumer confidence, direct financial impacts and potential workforce reductions were the only challenges more likely to be among the top three concerns for the 50 CFOs, 80% of which are from Fortune 1,000 companies and 44 of which are based in the U.S (the rest in Mexico).
- Thirty percent of the companies in PwC's survey were considering making changes to existing supply chains, but PwC executives expect that prognosis to change quickly, as the pandemic advances. The firm will conduct the same survey every two weeks to gauge shifts in sentiment. "The duration of the impact is the most important factor, and we expect that learnings from the outbreak will likely move the competitive forefront of supply chain operations toward more comprehensive, proactive modeling," reads the survey report released Monday.
In some ways, the Trump administration's tariff policy prepared supply chains for the shock of another massive disruption to China's economy, said Ryan. Sourcing diversification is a key supply-chain action firms are considering, according to PwC's report.
But beyond the disruptions the trade war caused and the COVD-19 outbreak has brought so far, firms have had to focus on what they can control, said Ryan. In many cases, that's the fundamentals. "Those who have been working very hard to control things like cost structure and liquidity will fair better," he said. "Supply chain is going to be a C-suite board room tonic for the time to come."
Ryan laid out the key supply chain challenges as the disruption of suppliers in China delaying inventory replenishment, and the domestic freight and logistics situation in the U.S. The latter is experiencing abnormal shifts in supply and demand as port calls remain slow, consumer supply chains go into overdrive and quarantine measures and the illness stress labor.
In the age of COVID-19, the illness caused by the new coronavirus, Ryan emphasized it is unlikely that entire industries will suffer uniformly, meaning each business will determine its future with its preparedness and response to some extent. (Ryan made these comments hours before cities, including New York and Washington, D.C., closed bars and restaurants and the San Francisco Bay Area received a shelter-in-place order.)
Based on the survey, CFOs are somewhat optimistic about their ability to bring their organizations through the current crisis. "Leaders are more confident in their own business' ability to weather the storm than they are in the overall economy," said Ryan. "This speaks to the confidence organizations have in their own scenario planning resilience and contingency planning," he said.
A key question to look out for as PwC conducts subsequent surveys, said Ryan, is one of recovery timing. Ninety percent of the CFOs in the survey said if the coronavirus outbreak disappeared today, it would take their company three months or less to regain normal function.
"I would expect going forward, as we continue to ask people this question, that their ability to bounce back as quickly will be challenged the longer and deeper the crisis goes," said Amity Millhiser, PwC vice chair and chief clients officer.