How to Prepare the Supply Chain for the Next Outbreak: ‘You Just Can’t’

(Bloomberg) --

Over the last 24 years, Liam Casey, an electronics manufacturing guru, has guided numerous brands through the intricacies of the Chinese supply chain. Today, he argues nobody could have prepared for the events of the past two months.

As the coronavirus inflicts incalculable damage to public health and economic growth around the world, every instinct of global business is being urgently questioned. Casey is the perfect guy to answer the alarm. He’s the founder and chief executive officer of PCH International, a company with core operations in San Francisco and Shenzhen, and—as Fortune magazine once described him—“the one you call for a factory connection, the guy you hire for your packaging design and the one you ask about FedEx negotiations.” The Atlantic magazine dubbed him “Mr. China.”

A triple whammy of cybersecurity threats, a trade war and the new viral outbreak are exacerbating a backlash to globalization and generating fresh questions about whether the tech industry relies too much on China. It’s perhaps not a surprise that Mr. China made the case that companies really don’t have any other choice.

“Over the last 20 years, a huge amount of the component assembly and manufacturing has been concentrated in China,” Casey told me on a video call from his office in San Francisco, about three miles from the Bloomberg newsroom. (I dared not leave the safety of my desk and its ample supply of Purell.) “You can move your final assembly today,” he explained, “but if you want a purely independent supply chain, that is a massive investment. I can’t see any one company that wants to make it.”

The Cork, Ireland, native is one of the most prominent Silicon Valley evangelists for, and beneficiaries of, a globalized supply chain, where products are developed and assembled in Chinese factories and shipped across the ocean, affixed with recognizable American brand names like Apple, Amazon and Dell. Like everyone else, PCH was impacted when the virus started to spread on the mainland over the Chinese New Year. Its Shenzhen factory remained closed after the holiday and reopened only after passing local inspections, two weeks behind schedule.

More than 100,000 people have been infected with the virus worldwide. No known cases of infection were found among the 500 employees of PCH in China or the 60 in the U.S., Casey said. “Today we are back up at 100% capacity, which has been a challenge,” he said. Other manufacturing operations are still flagging. Foxconn’s Hon Hai Precision Industry Co., Apple Inc.’s most important manufacturing partner, is hoping to return to normal operation in China by the end of the month.

Casey travels frequently to Shenzhen but is now grounded amid the outbreak. PCH has stopped all nonessential employee travel, and the company is using the video conferencing feature in Microsoft Teams to stay in touch. Casey has had to field panicked calls from clients, who would normally be traveling to China this time of year to oversee prototypes of products for the next holiday season. Casey recalled one customer telling him last week: “If I don’t get that product to market, all my colleagues, everyone on my team, will be out of work.”

Like the SARS outbreak of 2003, the coronavirus proves there are some events you simply can’t plan for, Casey said. “You can strategize against trade wars, but when it comes to something like a global epidemic, you just can’t,” he said. “I was in China during SARS. You had a period where everything stops.”

This time, Chinese authorities moved relatively swiftly to contain the coronavirus, Casey said. But now it has spread far beyond China’s borders, and he worries about the response from other countries: “No one knows whether the worst is over or not.”

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To contact the editor responsible for this story: Mark Milian at mmilian@bloomberg.net, Peter Elstrom

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