Blindsided by COVID-19

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As this global outbreak develops, action is now well underway. The fight back has begun.

The global spread of this unknown coronavirus strain COVID-19, means growing numbers of personnel are being prepped or have already moved to relative safety – safer for personnel, safer therefore for service – to a point.

Many supply chain operations (initially in China though becoming more widespread) have been rendered inoperable and have had no choice but to close entirely. With so many of the worlds goods and services coming from China, this very quickly triggered shockwaves and economic fears nervously felt around the world. Whilst at the other end of supply chain, consumerism in China has been blocked by far reaching albeit critical state ordered restrictions that have created huge difficulties for supply chains selling into the country from elsewhere in the region. This breakdown of service is now repeating itself across all other regions of the world.

In terms of crisis management, the likelihood of a “crisis qualifying” event has of course now well and truly materialised. The impact however is still globally emerging. Relatively speaking, it’s still early days.

Throughout supply chain, businesses across the spectrum are attempting both to mitigate a trade down turn at point of sale, whilst also trying desperately to retain a modicum of service (amid constantly worsening circumstances and tightening government guidelines). All this in parallel of course to protecting the welfare of their own workforce. Whether in fact this officially turns into a global pandemic, it’s already become a global emergency that threatens to trigger a world wide recession.

Migration of workforce

The steady migration of the workforce is already accelerating. It has been for at least the last 5 to 10 years – encouraged by big business driven by technology, rising overheads, other forms of economising and sustainability, and lifestyle factors.

Global events and natural disasters are occurring with increasing frequency. This current epidemic soon possibly a global pandemic will almost certainly create a knock-on, perhaps permanent effect on many of our attitudes in deciding on alternative more compromising working arrangements. You can read more about that here.

Force Majeure is changing

Governments around the world in assessing the progression of corona virus, and the scale of impact on their populations, are starting to introduce increasingly stringent measures such as imposing limits on mass transit, restricting large gatherings, and closing schools.

International supply chains are now almost without exception focusing on contingency planning and damage limitation.

But this goes way beyond a tactical reaction to the current crisis. Suppliers (aka most organisations) are looking beyond the horizon. The future represents change. Although it’s not known exactly what that is, it’s reasonable to make assumptions based on history and the pattern and predictability of different types of ever more present seismic event.

In future, complex or hazardous environments will mean the next generation of ecosystem will feature entirely more robust mechanisms to protect supply chain integrity in the face of an increasingly volatile global landscape.

Force Majeure, which focuses on a party’s inability to fulfil any of its obligations through circumstances beyond its control, usually being acts of government, war, civil disturbance, strike – now includes epidemic. We’ve just recently started to see this included in contracts that don’t typically represent a high risk of this type of event.

What about plan B?

Supply chains are still commonly under prepared for Plan B – the complete swap out of a strategic service provision from an ecosystem. Plan B usually refers to an instance where a key supplier is acquired by a competitor or by an organisation deemed unsavoury, rendering future engagement unsustainable. Again, in future perhaps this should become more of a pivot function to allow diversification of source.

In summary, although the situation is rapidly evolving, it’s still vastly uncharted. Already, game changing lessons are being felt. These will in time become permanent reminders; and as the crisis worsens still, existential threats to workforce and livelihood will create even greater challenges for businesses of all sizes.

But lessons will be learned and more adept provision will prevail; this is the future, and the mandate for procurement supply chain souring, logistics and category professionals. They are critical players here, and must work jointly in collaboration with business leaders to build bold mechanisms for future trade.

Even at this relatively early stage we can say with certainty, that the rules are going to change. We will see new workforce safeguards and arrangements, as well as a host of measures to support continuity or contingency for business. This is the result of COVID-19. Contracting will see a plethora of new defences to underpin currently struggling operations, so that they may survive the next round of COVID-19.

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