Uncertainty from the COVID-19 pandemic has exposed vulnerabilities in the global supply chain. Since China is South Africa’s largest trading partner, local companies that have built their markets on the global trade network are feeling the pinch. Some are trying to cope with less people. Others have seen a dramatic decrease in productivity as customer spending changed overnight.

Exponential growth in trade over the past few decades means today’s global supply chains are incredibly complex, with manufacturers and distributors vulnerable to any sort of disruption. The impact from China’s extended production shutdown between January and March has evidently affected local businesses and manufacturers as they grapple with the domino chain of events.

The manufacturing sector contributes 14% to SA’s GDP, but during the first quarter of 2020, the seasonally adjusted Absa Purchasing Managers’ Index (PMI) experienced its weakest quarterly performance since 2009.

The disruption is impacting everything:

• Procurement of raw materials and finished products,
• Labour, with more people in quarantine,
• Sourcing, with travel restrictions making new business arrangements challenging, and
• Logistics, with disruption affecting capacity and availability at established hubs and supply networks.

Economies and businesses cannot wait for the Coronavirus to go away. They need to rethink the way they do business, and examine the entire supply chain.

Here are immediate and long-term business continuity steps you can take to protect your supply chain in future.

Ten steps to take now

1. Put your people first. Your people are your most critical resource, and they’re also having a hard time. What working arrangements make the most sense to keep them motivated and productive?
2. Monitor your ecosystem. Implement an ERP system to get full visibility into your supply chain, especially in countries affected by the Coronavirus.
3. Draft an emergency plan. What if there’s a confirmed Coronavirus case at your manufacturing facility? Establish processes for communication and coordination and designate responsibility for decision-making and communicating with customers and suppliers.
4. Keep your inventory close. Move stock out of heavily impacted areas and logistical hubs; find local suppliers.
5. Know your and your customers’ legal rights. Get legal advice about your responsibilities if you can’t get supplies to customers.
6. Revise your customer contracts. If you can’t meet your obligations, a clear understanding of your contractual terms will allow you to plan and prioritise your response.
7. Build a buffer. How can you diversify your supply chain to balance supply and demand?
8. Diversify everything. From suppliers to risk management.
9. Work with your stakeholders. You’re all in this together. Chat to your suppliers about potential material and manufacturing capacity shortages so you can prepare.
10. Analyse your data. Review business forecasts and run scenarios to determine current and future risk.

Steps to think about in future:

Diversify risk

Nearly 75% of companies reported supply chain disruption due to the Coronavirus – and 44% didn’t have a plan to deal with it. Diversity is your best defence against disruption.

Don’t rely on one or two suppliers; find multiple suppliers for all your products, both locally and in neighbouring countries. If you’re heavily dependent on Chinese imports, for example, consider a “China + 1” strategy, which keeps China as your main supplier but also sources from local suppliers.

Having production facilities with local suppliers spreads the risk and could cut transportation costs. What’s more, you’ll help to revitalise the economy, reduce cash outflow from the economy, and support job creation.

Tech-enabled supply chain visibility

COVID-19 has highlighted the importance of having complete visibility into your supply chain. When you know how the disruption affects your ecosystem, you can adopt alternative plans, such as developing routes to other suppliers.

Enterprise Resource Planning (ERP) applications integrate all business areas and connect customers and suppliers. A connected environment helps you to identify supply chain exposure, manage or mitigate risks, and reduce the impact of disruption.

Modern business management solutions leverage artificial intelligence (AI) and machine learning-powered platforms to illuminate supply networks and reveal a level of detail that was previously thought impossible. 

Prepare for the rebound

Things will get better eventually. Businesses that are prepared for the eventual upswing can move faster and capture a larger share of the pent-up demand. They’ll also solidify relationships with their existing customers and attract new ones.

Redesigning the supply chain

This won’t be the last pandemic or other global disaster that businesses will face. But the supply chain adapted and evolved after Brexit and trade and tariff wars. It will adapt again.

A business continuity plan for the supply chain of the future is critical. This means taking a broader view and considering controllable and foreseeable challenges. It means rethinking your logistics strategy and managing your supply chain in anticipation of the next disruption.

Many organisations build supply chains with globalisation in mind – the assumption being that global trade allows them to source, produce, and distribute products from locations with the lowest cost. The Coronavirus has shown that manufacturers need to rethink this strategy.

The supply chain of the future should enable businesses to be agile in their response to dealing with changing policies, regulations, and natural disasters. We can’t predict when these will happen, but we can mitigate their impact by being better prepared.

By Gerhard Hartman, VP, Medium Business, Sage Africa & Middle East