Lauren Zhao, Managing Director, UPS Hong Kong and Macau
The coronavirus has disrupted the world in an unprecedented manner. Mere months ago, the novel coronavirus, as it was then called, was indeed novel, and perceived by many to be a localized outbreak. “Whew,” was the collective sigh of relief for many international business owners as decisive lockdowns seemed to bring the virus under control.
Fast forward to today where businesses, cities, and even whole countries have seen daily life as they know it grinds to a halt. The widespread social and economic impact felt by big and small businesses alike is expected to persist for the next 12 months or even longer. Amid the pandemic today, even as businesses deal with near-term challenges, they need to also take the long view to prepare for the post-coronavirus world.
There is no telling how, or when the next black swan will arrive, but drawing lessons from the current crisis, businesses need to be able to adequately address the four biggest logistics challenges defining the landscape today: the closure of retail shops as a result of lockdowns, reduced airfreight capacity from virtually no passenger flights, shifts in e-commerce fulfilment, and production shifting offshore.
First, the closure of retail shops amid lockdowns and quarantines around the world. Once a nagging call for brick and mortar establishments to take steps towards click and mortar hybrid sales models has now become a deafening roar. From department store chains to the neighbourhood store, business owners need to accelerate their pivot to digital channels to keep revenue streams flowing in the face of restrictions imposed by governments around the world. To be able to effectively operate and ship on e-commerce channels means ensuring that businesses have the right tools to support their consumers, allowing for greater visibility, flexibility, and automation.
Second, working around reduced air freight capacity. Border closures and restrictions on domestic travel have forced passenger airlines to ground their fleets, significantly reducing common carriage air freight capacity – up to half of all air freight previously travelled in the cargo holds of passenger airlines. However, the demand for air cargo space remains for various reasons, including increased demand for cross-border e-commerce, the restart of China’s industries, and perhaps more so now, the flow of critical goods and services including healthcare shipments. What is crucial for shippers is to be flexible with options to keep the goods moving, either through transportation modes and transit time, cost, or the size and quantity of shipments.
Third, shifts in e-commerce fulfilment. Companies with an established online sales presence are not spared from the coronavirus onslaught either. Lockdowns and restrictions on non-essential businesses may have slowed manufacturing lines or stopping them altogether, or ready-manufactured products may be sitting in distribution centres waiting to be shipped. It may also be that suppliers are located in affected areas where a shortage of materials and products make maintaining a certain level of inventory more costly. Shippers need to look at solutions that streamline processes or provide cost-effective alternatives in order to maintain a sense of normalcy as far as commercial transactions are concerned at this time.
Lastly, the possibility of moving production offshore as a key component of business contingency planning. One quick fix for many businesses facing supply chain challenges has been to move available inventory away from affected areas so that these products can be easily accessed for shipping. Moreover, businesses should also look into Tier-2 and Tier-3 suppliers, securing supplies and available assembly capacity as a back-up in the event that their main production areas are affected by quarantines and lockdowns. Measures such as supply chain mapping enable businesses to identify these important plan B and C alternatives that they could take now and in the longer term.
Hindsight will (aptly) be 2020, but nevertheless, more than ever, businesses will need to focus on supply chain resilience in the post-coronavirus world, starting with improving supply chain visibility and identifying new risks and costs. Supply chains will still factor in traditional metrics such as cost, quality, and timeliness, but the lessons we learn today tell us that responsiveness and reconfigurability deserve more attention. This means conducting supply chain risk assessments, identifying where disruptions may likely occur, anticipating how governments would react, and prioritizing critical focus areas.
A diversified supplier network must also be established, with businesses identifying alternative suppliers to be activated at the drop of a hat should disruptions occur. Automated and digital processes should also be put in place, enabling greater visibility, collaboration, and optimization. Preparing for the next big event with such extreme consequences requires businesses to take the contrarian view and see beyond business-as-usual scenarios. The true visionaries will be the ones prepared to adjust to disruptive events with speed and agility, collaborating with trusted partners that will provide them with the network, capacity, and solutions in times of uncertainty and volatility.
Businesses that try their best to be as flexible and resilient as current circumstances allow will for sure reap the rewards of their actions in the post-coronavirus world. Perhaps then, their “whew” of relief will be one of having handled a crisis effectively.