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Viral Reaction: Zika and the Supply Chain

Posted by Andrew Beso | March 18, 2016

As the Zika virus spreads, how will it affect the future of global trade? 

The global supply chain is more connected than ever, demanding the movement of commodities be faster, more efficient and farther-reaching. Globalization has paved the way for multinational corporations to widen their presence in different countries and to link markets and people. The downside of establishing and relying on network economics is that risks now come from all over the world.


But what if these risks cannot be forecasted? And unlike terrorist organizations and political unrests, we can’t really directly pinpoint high-risk locations and definitively isolate them. This perilous factor is what manifests when disease breaks out in a global scale.

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World With Zika: A Diagnosis

The Zika virus, a disease that is spread primarily through a bite of an infected Aedes species mosquito, has put governments on high alert in recent months. Despite the known symptoms of fever, rash, joint pain and conjunctivitis, these are characterized as so mild that many infected people might not have realized they acquired it already. The widespread active outbreaks has been increasing in South America and in Caribbean island countries, with cases of sporadic transmission reported in the Philippines and Thailand.


According to Director General Margaret Chan of the World Health Organization, the Zika outbreak is likely to worsen before it improves . With as many as four million projected to likely get infected this year, it is now tagged as a ‘global public health emergency.’ This kind of hazardous situation is not just affecting people’s lives, but it has alerted some companies like UPS and DHL as well. More than a dozen cases have been reported in Florida, prompting the logistics companies to heighten their mitigating measures against the disease. All of these may appear as insignificant disruptions, but it is evident that these follow the exact same trend with how past pandemics started and eventually lead to severely affecting the global supply chain.


SARS And Its Contagion Effect


Severe acute respiratory syndrome (SARS), which impacted parts of Asia, North America and Europe in late 2002 and early 2003, has resulted to a contagion effect in Asia, a continent considered to be an electronics hub. Motorola, for example, refrained 500 night-shift employees from reporting to work on their Singapore plant and quarantined 305 workers as an assembly-line worker was diagnosed with SARS. In Hong Kong, Hewlett Packard (HP) had to shut down two business facilities and force its 300-workforce to stay at home . It is a standard protocol that if 5 to 10 percent of a company’s laborers are infected, operations have to be shut down.

Ebola Cuts Off Supply Lines

The quite recent pandemic that is Ebola, considered to be the worst since it was identified in 1976, caused over 4,500 deaths in West Africa. The ebola outbreak has affected supply chain in two-folds: first-order impacts are the ones directly affecting businesses, and second-order impacts are the ones that result from countermeasures that seek to prevent the virus from spreading further. African Minerals Limited in Sierra Leone had to stop operating as there is an insufficient number of working capital. In, ArcelorMittal S.A.’s iron ore mining site in Liberia, management declared force majeure and moved workers out of the country.


African nations are home to large operations of mining, agricultural and energy companies. Countries like Guinea, Liberia and Sierra Leone, with major commodities like aluminum and iron ores, and rubber products, were isolated from the rest of the world as all commodity access points (sea, air and ground) have to undergo stringent measures that has lead to costly delays. Multiple airlines had to bar all flights from affected countries due to public anxiety. One French airline was forced to stop flight operations to these countries as crew members feared exposure to the virus. Cargo shipments from Ebola-stricken countries going to Brazil had to wait 21 days, which serves as incubation period, before they could dock. On the other hand, ground transportation faced roadblocks in major hubs and strict border controls that have led to rerouting and delays; both result to added costs.


Fear Factor

The Zika virus may not be as deadly as other pandemics, but it generates the same public anxiety as did Ebola and SARS. Supply chain networks are designed in such a way that a determined quantity and quality of a commodity needs to be transported at a calculated timeframe. Businesses invest in supply chains that can bring in this assurance. All supply chain risks are considered disruptive because of the uncertainty that they bring. Disease outbreaks, on the other hand, are damaging to businesses because of the confluence of many factors, from human error, volatile and erratic public reaction, and the enigma that a lack of scientific understanding bring, that cripples company operations.

 

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