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Supply Chain Management
Since our update last week, the coronavirus situation has regrettably worsened. As of this morning, the number of confirmed cases in mainland China has increased to over 40,000 and the death toll has tragically risen to over 900 people. The Chinese government is currently taking significant steps to prevent the spread of the virus and is doing so at a scale never before thought possible.
The safety and well-being of our families remains in the forefront of our minds. Fortunately, the Fictiv team based in Guangzhou city is safe and healthy, as are our manufacturing partners in the Guangdong province.
Fictiv is preparing to resume office work in Guangzhou on Monday, February 17th, along with all other companies and factories in the Guangdong province, which have been shutdown since the start of the holiday. Preparations and safety measures have been put in place, though there is still uncertainty over the coming weeks. Currently, all companies must apply with their local health departments to receive an on-site safety verification and approval in order to resume work.
Our team is in constant communication with our manufacturing partners. Hundreds of millions of migrant workers remain quarantined in their hometowns, and few are making preparations to return to Guangdong until the outbreak is contained.
As of February 10th, all companies must undergo verification by the local health department before they’re allowed to resume work. According to our contacts, the government is hesitant to re-open all companies at once and would rather do so incrementally. Priority is being given to those businesses that directly help the situation, such as medical mask factories. It appears that many smaller factories may remain closed this week until they gain approval.
Though some factories may resume work on February 10th, it’s expected that they will be at very limited capacity through the end of the month, both in terms of ability and personnel. Office workers are able to work remotely from home on their laptops, but factory floor workers must be present at the factory for production to resume. Another consideration is that many factories have key individuals, such as managers or technicians, who are critical to the production process. In these cases, even if a factory is well staffed, production is dependent upon these key people being present.
We are finding much is being managed at the government local level. For example, in the dense manufacturing district of Bao’an, Shenzhen has started to directly shut down any factory or company should one of the staff fall ill now that work has resumed. It is possible that these local measures will be enacted, potentially with little warning, on city or provincial levels.
Cities outside of the outbreak epicenter province of Hubei have also closed for quarantine, including Hangzhou, Wenzhou, and Taizhou, and other cities may take similar actions.
Aside from factory production, there are other manufacturing concerns from related disruptions. Raw material suppliers are an uncertainty, and, despite perhaps having taken orders before the holiday, they remain uncommitted to firm delivery dates. Air freight capacity is also significantly diminished, as many passenger flights (that also carry freight) have been canceled traveling to and from the mainland. It is believed that larger companies, such as Apple and Microsoft, are currently purchasing the remaining open capacity.
Agility is the core strength of Fictiv. We are already shifting production away from the Guangdong province to our distributed network of manufacturing partners in the US, Taiwan, and India. These partners have long-standing relationships with Fictiv and are ready and eager to take on additional work that is planned to be diverted to them.
We have our own quality staff in both Taipei and Mumbai in addition to our staff based in China. We have verified open capacity onsite over the past weeks in preparation. All Fictiv orders are managed and quality checked in the same manner, regardless of the geographic region in which they are produced.
We will continue to monitor the situation within the Guangdong province with the help of our local staff in Guangzhou. Once our manufacturing partners have demonstrated safety, stability, and capacity to our Supplier Quality Engineers, we will resume work with that particular partner.
We remain committed to staying on top of this challenge by keeping our people safe and our customers informed while minimizing any impact on supply chains.