2020: We’re only six months into the year, and what a rollercoaster ride it has been already. Covid-19 has rocked the world, turning life – and business – as we knew it upside down. Whilst many express a desire for life to return to “normal”, the fact of the matter is that normal wasn’t working.
The pandemic has exposed systemic failures in business and in society, and presented us with a golden opportunity for change.
Holes in the Supply Chain
Global supply chains have been shaken, as the speed at which the pandemic engulfed the globe left no time to react and control. The immediate cessation of business activity resulted in shortages of even the most basic supplies, exposing gaps and dependencies in the way in which we do business, and how our supply chains operate.
Fear and uncertainty triggered a complete shift in wallet-share towards basic necessities such as food and medicine, with consumers buying in bulk and stockpiling essentials. In the month of March, the Great Toilet Paper Panic saw the bathroom basic become worth its weight in gold, as shoppers wiped supermarket shelves clean.
Consumer buying behaviour shifted to an almost complete halt in spending on everything that was not absolutely essential. Coupled with lockdown restrictions, this sparked extreme reactions from retailers – cancelling everything that they had in their Supply Chain on the grounds of Force Majeure.
And so began the downward spiral of cash flow disruption in the Supply Chain, as interdependent industries fell subject to the domino effect.
We are seeing the largest and fastest decline in international flows in modern history. Forecasts predict a decline of 13-32% in merchandise trade (WTO), a 30-40% reduction in foreign direct investment (UNCTAD), and a 44-80% drop in international airline passengers in 2020 (UNCTAD).
Governments all over the world have had to step in to mitigate, as much as possible, the immediate effect of the cash flow disruption with economic relief packages to facilitate the businesses and save them from crashing.
New estimates indicate a colossal drop in global trade numbers – according to WTO, trade may regress to what it was in the 2000s. Dwindled trade numbers and stagnant distribution networks have impacted all industries involved in the Supply Chain.
Analysing Supply Chain Inefficiencies
Supply Chain has evolved over the past few decades to become global, lean and extremely interdependent. In efforts to respond to cost pressure we have seen businesses manufacturing in low labour cost countries, with extremely low inventory levels and just in time (JIT) down to the tier 2 and tier 3 suppliers. A break or disruption in any part of the chain renders the proceeding industries adversely affected.
The pandemic has left the best laid plans and strategies ineffective, forcing the world business leaders to the drawing board to evaluate the inefficiencies of the Supply Chain. Globalization vs Domestic Production has become a debate, as has the dependency on any one source of production (no matter how advantageous it may be).
Supply Chain resilience has been pushed to the forefront, as each step must be analysed for weaknesses. Often, Supply Chain Managers tend to buckle under cost pressure and focus on one supplier or region for the desired merchandise. Going forward, a robust and diverse sourcing model must be adopted, and backups of each tier of suppliers need to be created with a balance of domestic and global supply.
Shock Instigates Change
Covid-19 has inflicted emotional, societal, economic and cultural pain on humanity, and will indubitably have long term reverberations on our psyche. But with shock can come positive change.
Never have we had more time to reflect upon the shortcomings of the society we live in, and the role that business plays in social and environmental issues.
A glaring spotlight has been placed on corporate social responsibility, leaving no room to hide behind wishy-washy CSR statements. Consumers and employees expect the companies they engage with to not only take a stand on pertinent issues, but to take action.
Over the past few weeks, we’ve seen this in relation to the Black Lives Matter movement. Companies engaging in performative allyship to ride the wave of a trending hashtag have faced as much criticism as those that have failed to denounce inequality and discrimination.
Throughout the pandemic, many brands have won public favour by providing real and meaningful value via proactive CSR initiatives. Manufacturing companies switching to the production of ventilators, personal protective equipment and hand sanitizer, and supermarkets allocating shopping hours for elderly and vulnerable members of society, have boosted their brand image in the eyes of consumers, employees and investors. The bond established between brand and consumer in times of crisis can often be more meaningful and lasting.
Sustainability has been a hot topic for the past few years. Emerging from the crisis, it is predicted to be a mega-trend.
The couple of months of lockdown have proven beyond doubt the damage humans are inflicting on the planet we call home. In the few short months of respite when business ground to a halt, CO2 emissions nose-dived
As economies slowly begin to re-open, CO2 figures are already nearing pre-Covid levels. While many countries are emerging from the worst of the health crisis, the climate crisis is no closer to resolution.
But it’s still very much on the minds of your consumers, employees and investors. Companies that fail to put sustainability at the very core of their operations and reduce their environmental impact at every stage in the supply chain can expect another uphill battle.
Comprehensive and concrete plans as to how exactly your company is going to cut the carbon footprint of its supply chain are essential to avoid falling victim to “cancel culture”.
Your customers are the backbone of your business – what they say goes. When it comes to sustainability in the post-Covid landscape, it’s do or die.
Within Crisis Lies The Seeds of Opportunity
As the dust settles from the initial shock of this global health emergency, we must seize the opportunity to adapt and improve.
From supply chain to CSR efforts and beyond, the face of business is undergoing transformational change. Make sure your company isn’t left behind.