Supply chain health check

Nazery Khalid assesses the performance of supply chains as the Covid-19 pandemic shows no signs of abating

Sign of the times

As the coronavirus which started spreading worldwide in early 2020 continues to ravage communities and claim many lives, it is worth to assess how supply chains are faring amid stuttering global trade, lackadaisical economic performance and harsh economic landscape.

The movement control order (MCO) and lockdown imposed in many countries have taken a heavy toll on national, regional and global economies and on international trade which is a key facilitator of the global economic growth.  United Nations Conference on Trade and Development (UNCTAD) has forecasted that global trade value will decline up to 9% in 2020 compared to 2019, owing to the disruption to world trade and global economy caused by the Covid-19 pandemic. The world is officially in recession and the economic hardship faced by many nations including Malaysia is not showing convincing sign of abating anytime soon.

Despite encouraging signs of rebound in international trade volumes in recent months, largely spurred by the recovery of China’s economy, prospects for full recovery of the global economy are still uncertain.  The specter of the adverse impacts of further imposition of MCO and lockdown on the global economy looms large as winter approaches and a second wave of the pandemic is expected to cause a spike in the number of cases worldwide. 

Many industries and enterprises continue to suffer from demand destruction of commodities, manufactured goods and services, many businesses have folded and scores of people worldwide have lost their jobs and struggle to make ends meet. This dire situation is expected to continue to play out until the battle against the deadly pandemic is truly won.

Against this grim backdrop, supply chains continue to operate fairly efficiently nonetheless, thanks to those working hard to deliver goods to markets and consumers.  As the spotlight trains brightly on the frontliners who work tirelessly and make huge sacrifices in leading the fight against this devastating virus, let us spare some thoughts to those who keep the supply chains running smoothly during these times of grave crisis. 

They include logistics industry practitioners, supply chain planners / managers; operators and crew members in the land, maritime and air transport modes; cargo handlers; courier / home delivery services providers; and personnel at ports, airports, land transportation hubs, logistics parks, free zones, warehouses, distribution centers and other trade-related facilities. They are among many dedicated personnel undertaking a wide spectrum of activities along the length and breadth of supply chains.

Operating an astounding variety of assets, systems and facilities, they ensure the smooth, safe and speedy movement of a variety of commodities and products from the point of production to the point of consumption.  They are the unsung heroes who facilitate the transportation of cargos across domestic, regional and global supply chains. 

Their work is largely unnoticed but is immensely important to the world order, helping producers reach markets, and enabling businesses and consumers to have access to raw materials, food and manufactured goods.  Throughout the MCO and lockdown, they keep industries and businesses ticking, and movement of goods across supply chains flowing.   Seeing in this context, their contribution is just as critical as that of the frontliners to maintain a semblance of order amid these testing times.

Action station

Supply chains across industries and businesses were severely disrupted during the start of the pandemic as logistics, cargo handling and transportation came to almost a grinding halt due to the movement restrictions and lockdown. However, to the credit of many practitioners and parties along the chains, they have reacted swiftly to make adjustments to the disruptions and to the emergence of ‘new normals’ triggered by the outbreak of the virus.  This has thus far resulted in remarkably minimal disturbances to the movement of goods from producers / manufacturers to end-markets, in Malaysia and elsewhere. 

Testimony to the work put in by workers along the local supply chains, there have not been any complete breakdowns or major disruptions along the chains.  This is admirable when one considers the MCO imposed in Malaysia, a trade-oriented and export-driven economy which is well integrated to international and global supply chains. 

Even during the early days of MCO when there were much uncertainties and anxiety among industries, businesses and the general population about the disruptions to routines and the possibility of not getting essential supplies, logistics players stepped up to the plate to provide services and ensure fairly smooth movement of goods along supply chains.   Kudos to them for ensuring the supply chains remain in good working order and in overall robust health.

As observed, the following are among the notable actions taken by industries, corporations and businesses as well as logistics services providers to improve their supply chain management to minimize disruptions in the delivery of materials and goods amid the pandemic.  They are taken with the key objectives of eliminating inefficiencies, boosting productivity, driving down costs, and making their supply chains more agile, flexible and resistant to shocks and interruptions like the ones emerging during the coronavirus pandemic. 

  1. Centralizing supply chain set-up to house key supply chain activities such as negotiation, procurement, outsourcing and inventory management under one roof within the organization[AHBH1]  to sync them with one another, to exert better control and closer monitoring, and to reduce redundancies and cost.
  1. Reducing lead time and costs of supply chain activities through shared services and outsourcing of non-essential, non-core activities, and through disposal of unproductive assets and acquisition of value-adding ones.
  1. Reducing, if not altogether eliminating, redundancies and duplication in supply chain activities and promoting aggregated decision-making that leads to better, more informed decisions.
  1. Promoting standardization and common standard operating procedures (SOP) and processes across departments and business units within the organization.
  1. Improving bargaining and negotiating power with suppliers / vendors through economies of scale through reducing the number of suppliers / vendors to enhance efficiency and obtain lower costs from them.  
  1. Minimising disruptions impacting the organisations’ supply chains and exerting better control on the risks from reacting swiftly to any developments and changes detrimental to supply chain activities.  
  1. Promoting better use of data (including collecting / capturing, tracking, processing, analyzing and measuring of data) to make informed decisions in supply chain management to increase visibility of supply chain activities and to enable sharing of data across supply chains.
  1. Allocating and utilizing resources – human capital, assets, data and finances, among others – more optimally to match operations and strategies with market conditions.
  1. Enhancing and intensifying the use of technologies (especially within Industry 4.0) to cater to greater demand for e-commerce, online shopping and increasing digitalization of the global economy, to reduce cost, time and errors in delivering goods, and to enhance productivity and efficiency.
  1. Renegotiating contracts with suppliers with a view to reduce purchasing to a minimum and keeping their inventory lean.
  1. Altering specifications of existing products, offering new products and / creating differentiation to gain competitive advantage.
  1. Exploring / entering new markets to reduce vulnerability from being overly dependent from a single market or a small number of -markets.
  1. Stepping up efforts to engage with customers to cater to customization, provide better customer experience and retain their loyalty.
  1. Engaging in strategic alliances and / or consolidating through merger and acquisition of other companies to benefit from technology transfer
  2. Retraining and upskilling human capital to learn new skills, approaches and methods to adjust to changing operating landscape and to meet customer demand and expectations.    

Adjusting to new normals

Through these actions, corporations and companies have demonstrated a keen awareness of how better management of their supply chain can make them more efficient organizations all around.  Many have found that being quick to adjust to fluid surroundings and new normals amid a crisis like the Covid-19 pandemic is essential to remain competitive and even viable.  They have also discovered that adopting best practices in supply chain management can help them stay the course and even contribute positively to their bottom line and business sustainability. 

Industries, businesses and consumers will hope that players along the supply chains will continue to do the right things and do things right to ensure there is not much shock to the well-established system of delivering goods.  However, the emergence new normals, and the growing popularity of e-commerce and online shopping amid the MCO and lockdown have triggered new dynamics, paradigms and customer expectations. 

These demand logistics service providers and parties along the supply chains to step up their game to adjust to the shifting landscape and meet ever-changing customer demand and behaviors amid an increasingly digitalized global economy.

Here’s to the good health and wellbeing of workers along the supply chains to continue their amazing work to ensure that the supply chains remain healthy and our economy and daily lives are not too adversely affected during this worrying, challenging time.

Nazery Khalid is an ardent commentator of issues and developments in supply chain management and in the logistics and marine / offshore industries.  He welcomes feedback at [email protected]

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