The Overview of How the COVID-19 Pandemic is Changing Supply Chain Management

                                 Photo courtesy of Pexels, for illustration purposes only

 

Introduction

Environmental, Social and Governance (ESG) risks poses threats to companies worldwide to drive globalization ambition to a more shared value and interconnected society and partnerships. This is not exclusive to certain companies or certain sectors, as what we are witnessing from the shocking effects from COVID-19 pandemic is that ESG risks are extensive across borders or even from the domestic landscape.

Impact on Trade and Investment

As vividly observed from lockdown measures across the world, local and global investment and trade are severely impacted and hurting most of companies supply chains and causes uncertainty of how the new norm and current measures taken are capable of ensuring supply chains are fluid as before the pandemic and could remain profitable – or even still operational.

Certainly this will contribute to the decline in global direct investment (FDI) in the following year, as well as decline in global mergers and acquisitions as these are linked to how resistant to which restrictive measures become binding and supply chains being relocated to home markets.

It is highly talked about these days that ESG risks are inter-related and so are the impacts. Thus, various professionals are advocating that the ways companies react to the COVID-19 pandemic impact shouldn’t be a ‘one-off’ approach as companies need to anticipate of other ESG risks such as climate change that will pose similar or greater impact.

The process of placing of restrictions and screening on investment and trade before the pandemic was justified based on the concerns of being solely dependent on a foreign company for supplies for goods and services and also the encouragement to local expertise and technology to be kept within the borders for security, surveillance or sabotage mitigation approaches.

This will soon be obsolete and will change fast. ESG risks will now add a different layer of filtering dimension to the beforementioned concerns that will change the global investment and trade flows. 

Companies Need to Transform

Normal ways of supply chain management are not deemed capable anymore to ensure robust business continuity.

Business models from companies are now changing. The global supply disruptions and restrictions have required companies to transform the very fundamentals to the value chain as a whole by remodeling business strategies and resilience capacity across operations. Companies now are diversifying their lines of production by also expanding the reach of secured and credible value chain across borders to ensure operational supplies are not interrupted.

Companies are also looking to implement structural changes by improving investment in technology and innovative solutions due to the demand of the present pandemic circumstances as well as a part to ensure business efficiency.

These are just gist of the transformation required but companies’ Boards and management need to realise that the value chain management transformation requires a more complex approach to ensure the change in supply chain management would be profitable and sustainable in the long term.

Focus on Domestic Suppliers

The supply disruptions due to COVID-19 cause companies to be looking inward towards suppliers within the border to secure readiness, availability and cost efficient (in some cases) supplies for operations. But how does this affect local businesses?

The government and regulators play the key role in the need to enhance and communicate the existing policies towards empowering local businesses to reach the capacity and capability to meet demands in the market, investment and trade.

Governments and regulators, and even private firms need to come together to re-strategise on approaches to ensure local business resilience through dynamic supply chain management. One of the ways this can be achieved is by investing and advocating in technological and innovative solutions. Certain sectors are less affected whilst dealing with the pandemic such as the energy sector that have certainly been paving ways for innovative thinking and solutions to mitigate the current pandemic crisis.

Local businesses also in need of support towards developing enhanced business models as well as diversification portfolios. This emphasis should extend to other sectors such as health and medical industries, technology as well as food producers.

The need to rethink on the critical goods and services for domestic production should be increased to meet market demands.

Focusing on market presence and reputation by local suppliers should be driven diligently. Their goods and services should be competitive and aligned with national and international standards to stand out as the suitable or better alternative to the market.

Conclusion

Companies need to transform to adapt and sustain in this new business environment that has majorly impacted the traditional global supply chain management. Securing sustainable supplies for operational business continuity should be one of the forefront agendas for companies in dealing with the new norm from COVID-19 pandemic, but also other unprecedented ESG risks in the future.

 

All views and opinions expressed on this site are by the author and do not represent any particular entity or organisation