Strong supply chains key to surviving COVID-19 - and to recovery
Lessons learned for the future
Strong supply chains can be the difference between success and failure in a crisis – and just as important position both government services and business for recovery in the post-crisis phase.
In its first seven days, the COVID-19 national shutdown has reduced South Africa’s economy to one of moving and supplying essential services – and the value of strong, agile and compliant supply chains are already evident.
DSV’s crisis planning had gone live before the shutdown was announced, and operational resources were being deployed to meet the areas of anticipated need. Permits and permissions from authorities were quickly put in place before the shutdown became operational, and our African Crisis Committee meets every day to review and plan.
Despite a relatively smooth lockdown, there are challenges.
- Regular supply chain challenges – incomplete paperwork and misallocated resources – exacerbated by constrained capacity, have resulted in essential goods not moving as smoothly as they need to.
- Static and increasing inventories in the face of almost no demand is causing significant cash flow challenges for all stakeholders in the supply chain.
- Air freight costs have risen by up to 500% and could rise further, and air freight capacity is jammed.
- Non-essential goods remain stockpiled at ports. Importers have not been able to postpone payment of customs duties and VAT, adding to the cash flow challenges with little chance of recovering the cost of sales in the foreseeable future.
- Ports themselves are becoming blocked with non-essentials, and this could create difficulties moving essential goods in the future.
More robust supply chains are helping mitigate some of these issues, and already some businesses are looking at how best to accelerate a recovery – when the time comes.
The recovery of both the global and SA economies are going to take time, with some suggesting anything up to five years. Once the crisis is over cash and liquidity are going to be needed, and financial institutions are going to have a major role to play in the rebuilding of the economy.
Lessons can already be learned for supply chains from this crisis. Few industries have fully embraced supply chain risk management, but undoubtedly more will follow now. In improving supply chain resilience, organisations must:
- Build monitoring systems to evaluate and assess all types of risk
- Assess and monitor the stability of all suppliers, and businesses should not expect tier one suppliers to manage tier two, three and four suppliers
- Have greater insight into their supply chains – and more trust in those insights
- Build trustworthy partnerships with suppliers, particularly with logistics service providers, and recognise the need for collaborative planning and execution with their supply chain partners. Partners must jointly articulate supply chain strategy and plan logistics execution