COVID-19 is a wake-up call for our fragile supply chains

The coronavirus pandemic has proved a bitter pill for the world’s business leaders to swallow and one unlikely to digest any time soon.

From delays to the new iPhone to shortages in medical equipment, the COVID-19 virus has exposed the fragility of our globalised economy and the tangled complexity of our global supply chains.

As an imports-driven economy, Singapore is particularly vulnerable to these unprecedented disruptions to international networks. As Minister for Trade and Industry Chan Chun Sing highlighted, the virus has proved “a good lesson for everyone to really look at the supply chain resilience”.

For Singapore’s modern consumers, online shopping and next-day delivery are as ubiquitous as eating in the local hawker stand. Yet behind every click lies a vast, tight and highly efficient web of supply channels built over decades of globalisation.

Ever since COVID-19 took hold of Wuhan back in January, the world has witnessed the true scale of businesses’ heavy reliance on China for manufacturing.

As a wave of industrial closures and worker quarantines swept through the world’s factory, businesses have grappled to secure their raw materials and components as their suppliers’ production ground to a halt. The domino effect of this has resulted in suppliers and logistics channels struggling to deliver their goods.

Multinational giants from Apple to Hyundai, alongside Singaporean firms like Straits Construction, have faced lengthy product shipment delays from China in the wake of the pandemic.

Even now as China shows signs of recovery, supplies remain disrupted as South Korea, Japan and Europe attempt to mitigate their own COVID-19 outbreaks, creating bottlenecks across logistics networks.

For the end-customers, delayed shipments carry issues both in terms of an inventory shortage and for their cash flow.

Not only do these bottlenecks harm businesses on the import side, they also hit those who are trying to export goods to coronavirus-affected markets. Countries like Australia, which exports huge quantities of coal, iron ore and seafood to China, are already facing economic declines due in large part to the fall in shipping.

Nevertheless, whilst the coronavirus is unique in its level of societal devastation, it is not rare for supply channels to face such disruptions on a global scale. Fortunately in Singapore’s case, the Indonesian sand crisis of 2007 proved to be enough of an incentive to diversify its supply sources.

However, it is not always possible to source certain parts from different places, either due to geography or intellectual property requirements. In light of this, there is a strong argument for better oversight further up the supply funnel.

From reactive to proactive

Thanks to digital transformation and the availability of supply chain management tools and big data, specialist trade organisations are in a better position to anticipate these unforeseen circumstances. With the right data and channel visibility, companies can monitor their flows of inventory, map potential disruptions and use the global network create strategies to mitigate these and minimise the impact to end customers .

Effective supply chain management gives the companies a competitive advantage over their rivals and helps them eliminate waste and reduce inherent risks. However, few seem to be using these management tools enough. According to Harvard Business Review, the majority of companies around the world have responded to the pandemic in a “reactive and uncoordinated way,” due to a lack of clear information and visibility of their channels.

Chief executive officers should see the current crisis as an opportunity to re-evaluate their procurement management, switching from a reactive to a proactive mindset. This can include, where possible, planning and activating alternate sources of supply, utilisation of digital and supply chain specialists, using the most up-to-date technology to keep track of goods, from factory to freight.

In addition to this, CEOs and managers need to be communicating all the possible supply chain risks with their employees, alongside risk-prevention measures.

Whilst the Red Dot has been held up as a model on the world stage for detecting and containing the virus, business leaders themselves should set a standard for protecting their employees, either through hygiene education or screening protocols.

For companies that supply, produce or distribute from an impacted country, it is important to focus on workforce and labour planning, so staff are both protected and resources are managed effectively.

The global picture of the world’s eventual recovery from the pandemic looks bleak: as of 2 April, the number of cases stands at almost one million and only a few nations are showing signs of flattening the curve. For most organisations, it will still take at least six months before they can claim to be “business as usual” again. But if organisations choose to adopt the right risk assessments, supply chain management strategies and communication with employees and stakeholders, they will emerge from this stronger. As it is often said, prevention is better than cure.