From manufacturing to tourism, the rapid spread of Covid-19 has impacted industries around the world making business executives rethink and reassess the viability of their operations. This is especially evident when it comes to those in supply chain management where companies are constantly being pressured to ensure that goods and supplies will reach those in need. Having to deal with demand shocks, travel restrictions, domestic and international shutdowns, the supply chains of companies are being required to be reliable against the backdrop of volatile conditions.
“A lot of companies now are thinking about the immediate short-term impact of their supply chains with a focus on getting their fulfillments done,” observes Samuel John Mathew, Global Head, Documentary Trade at Standard Chartered. “Many companies are going to learn some hard lessons from Covid-19 which will force them to think about the strategic approach to supply chains with an emphasis on building resilience.”
Already having to adjust due to ongoing trade tensions between the United States and China alongside the general rise of labour costs in China, Covid-19 has been another wake-up call for companies to the importance of diversifying their supplier base or manufacturing hub beyond traditional markets such as China.
According to Mathew, forward looking companies should be ready to adopt an agile supply chain approach where they can easily switch between suppliers in different markets or regions on their platform in case of a disruption with one particular supplier or market. Another aspect of supply chain agility focuses on companies repurposing their production lines due to business imperative. For example, BYD and Tesla are redirecting their factories to create much needed masks and ventilators to combat the pandemic, while LVMH’s Dior has switched from producing perfumes to sanitiser and Burberry has replaced trench coats with surgical gowns.
While easier said than done, companies looking to diversify supplier relationships or establish a new manufacturing hub in another country such as Vietnam or Bangladesh should consider a number of factors.
“Top of mind considerations for companies looking to enhance their supply chain is examining the production capacity for this new supply source and the capital investment needed," highlights Mathew. “Companies will need to ask themselves if this new supply source has the same or better infrastructure and logistics capabilities as my existing providers, as well as answer questions on reliability, quality, availability of skilled labour etc as compared to the current source(s) .”
In addition to revaluating the geographical spread of the supply chain, the Covid-19 situation has presented companies with an opportunity to adopt more digitally focused solutions to improve efficiency within their operations. For example, a local supermarket or retail store which used to rely on a brick and mortar strategy to increase business could now consider looking at online sales as a way of driving growth. “An increase of online sales could compensate to a large extent the drop you would see in your brick and mortar flows,” Mathew says.
Covid-19 has also prompted companies to seek digital solutions to their supply chain or trade finance requirements, with Mathew sharing that there has been a notable increase in clients contacting the Bank in search of solutions that don’t require physical meetings or for processes that can be approved remotely. “We are seeing a lot of demand for digital client instructions and seeking the use of digital alternatives to physical documents to issue an LC or a bank guarantee given the current circumstances.”
While the uncertainty around how the Covid-19 situation will pan out is delaying most strategic deployments, Mathew is confident that “geographical diversification is going to be top of mind for companies when they are looking at their supply chains in the future.” Though the impact of Covid-19 is a challenging situation it is also a chance for companies to view supply chains as a strategic enabler in their business.