COVID-19 And Supply Chain Failures

COVID-19 And Supply Chain Failures

The COVID-19 global pandemic has highlighted supply chain issues across the world as governments and organizations struggle to secure badly needed personal protective equipment and test kits needed to combat this virus.  It has wreaked havoc across an unprepared world and the race to secure supply of face masks has placed supply chain issues front and center. Countries that manufacture masks have tried to keep them for their own citizens. Those countries that outsourced the manufacturing and supply of PPE to a low-cost country are struggling to get shipments and place new orders. Prices have skyrocketed due to shortages and a catastrophic shutdown of the worlds freight routes due to passenger fleets being grounded.  In short, most countries were woefully under-prepared for this pandemic and the struggle for much needed PPE has dominated media coverage and created a climate of intense competition between governments.

Despite the supply challenges, mounting public pressures and the new chaotic business environment we are currently in, there are learning opportunities that should be considered now.  With so many governments and organizations seemingly in crisis management mode, it is easy to dismiss the necessity for real-time analysis and instead push any supply chain review to a post-pandemic analysis when time and resource constraints may be less limiting. However, even now, it would be worthwhile to make real-time notes, gather relevant documents and begin to consider key themes

When supply chains are functioning well, it can seem less important to fully understand every step along the chain. However, this pandemic has highlighted the need to properly understand the marketplace where products are sourced and purchased. From who handles the first step, materials or items, to who moves the items and how and where they are moved, to knowing and understanding other buyers and competitors. It is essential to understand the complete picture. Furthermore, it is doubtful there will be a return to normal as it was pre-COVID-19, and therefore it makes sense to dig in and begin collecting data and information for a full-scale analysis that will better enable companies to understand risks and challenges.

Factors to consider in your analysis:

  1. Key Drivers

Preservation of money (savings, discounts, low cost workers etc) is often a key driver. Maximising shareholder value is another common driver in many business decisions. There is no doubt that cost optimization is an important factor in planning and profitability considerations, however, opting for the lowest acquisition costs must be balanced with supply chain risks when making decisions.

  1. Long Term Sustainability

We have yet to understand the full impact of this virus, but it is clear that many industries and business sectors will likely undergo a period of review and change in the coming months and years – supply chains, elder care, retail, home delivery and remote work environments to name a few. .

Over the last 50 years or so countries with low-cost labour markets have come to rely on demand for cheaper products from richer nations.  If countries begin moving back to domestic production and supply, the social and economic impact across the globe will be stark.  Partisan politics and back-room deals often power these decisions without enough consideration of the long-term consequences.  Self-preservation and political dogma mean quick fixes are often prioritized over long-term sustainability. However, planning for future pandemics or emergencies needs to become a top priority for both governments and organizations across the globe.

  1. An Obligation to Protect Citizens

Companies, governments and even individuals are going to be making choices and decisions that will impact others in the coming months. The only certainty is that changes are on the horizon. Choices of how to protect citizens could become one of the key supply chain management decisions. The move away from lower cost supply countries, if it happens, will not happen overnight, rather it will more likely be a gradual shift over time. Additionally, a shift in consumer demand will be necessary to create large scale changes in some sectors such as global food supply. Relying more on seasonal and locally grown foods on a national level would demand a monumental change in consumption habits, however. In this new changing environment, we may never truly return to normal as it was before COVID-19 but everyone from governments to private business needs to be prepared for the changes ahead. There are no past controllable models for radical unprecedented, unexpected change aside from financial crash models and post-world war models, so it is difficult to look to the past to predict where we are going.

Whatever the future choices may be, in terms of supply chains, governments and organizations need to undergo a complete analysis with the aim of developing more sustainable strategies that will strengthen their supply position for any future pandemics or emergencies. 

If you are interested in reviewing your supply chains, IPG can help. Submit the form below to schedule a free consultation with our team.

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