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FM Global urges action on supply chain weaknesses

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Australia’s geographic remoteness should not prevent moves to diversify supply chains as the coronavirus outbreak highlights risks from global shocks, FM Global says.

Operations Manager Lynette Schultheis says current supply chain disruptions, production delays and distribution slowdowns are having a significant impact on revenue and loss of market share for businesses globally.

“While the pandemic played its part in showing just how important supply chain diversification is, other world events also continue to make clear just how easily other factors, such as political tensions between countries, can impact trade and the availability of goods and services,” she told

Ms Schultheis says Australia’s remoteness compared to other regions amplifies its dependence on China and Japan as trading partners, while the country also has extra vulnerability as it imports most of its machinery and equipment.

“This concentration in our supply chains also exists in the opposite direction, with Australia exporting a relatively more narrow range of goods – focused on natural resources, such as iron ore, coal and natural gas,” she said.

“For all of these reasons, there’s a need for Australia to diversify the countries it trades with. While our geographic remoteness will mean that sourcing and sending goods to other markets across the globe will be more costly, the cost of not building in this resilience will be far greater.”

Ms Schultheis says businesses should be routinely evaluating contingency plans to make them more resilient, minimising damage from unexpected events.

“Businesses need to understand the risk within their tier one suppliers, as well as having visibility of the extended supply network,” she says.

“In addition to identifying who alternate sources of supplies are, businesses need to know who their alternate logistics partners might be, ensuring they have diversification built into their plans.”

FM Global highlights the dangers of responding to the current situation in a “reactive and uncoordinated way” and stresses the importance of data-driven planning and taking a two-to-five year view into consideration.

A multi-faceted contingency plan will give businesses the best chance of surviving a viral outbreak or a natural disaster with minimal immediate or long-term damage, Ms Schultheis says.