The Emergency Reorientation of Supply Chains
By
A world criss-crossed by complex, tightly integrated supply chains was always going to be extremely vulnerable to a corona-type pandemic and so it is proving. In the early stages of the crisis, while it was still largely confined to China, the main concern was over the severing of Far Eastern supply links. Within weeks, the supply chain impact of coronavirus has become all-pervasive, spanning the globe, disrupting demand as much as supply and affecting virtually every sector and product group. Amidst all the supply chain gloom, however, there are heartening reports of supply chains being rapidly reconfigured to meet the new challenges coronavirus has created. Lessons are being learned at short notice which hopefully will inform longer term supply chain resilience planning.
Examples of the emergency reorientation of supply chains fall into several categories:
Product diversification: where firms are using their core competence in one form of manufacturing to mass produce life-saving medical products: car and household appliance manufacturers making ventilators; cosmetic companies making hand sanitisers; clothing manufacturers making face masks. For them the challenge is not just modifying the production process, but also sourcing the additional parts and materials they would not normally stock. The use of 3D printing is allowing some of them to minimise the need to externally source some of these medically-related components.
Market re-orientation: the enforced switch from eating-out to eating-in is creating an enormous food logistics challenge. Large wholesale inventories of food intended for catering outlets, much of it in large pack-sizes and with a short-shelf-life, now have to be redirected to those self-isolating at home, many of them elderly and disabled. For the food service companies deprived, almost overnight, of their core market of restaurants and bars this involves a fundamental change to the business model and as well as the logistics system.
Labour redeployment: while in the longer term the coronavirus crisis may spur the automation of more processes, logistics today is essentially a people business. This is reflected in the current mass redeployment of labour from businesses in lock-down to logistics support roles in other critical sectors such as the distribution of medical supplies, supermarket retailing and home delivery. A massive recruitment and re-skilling exercise is underway against a background of tightening government controls on personal movement. This is swelling the ranks of gig-economy workers across the logistics sector. Although their employment and financial status is usually fairly precarious, they are playing a vital role in meeting the surge in demand for last-mile logistics in a self-isolating world.
More information:
- presentation, Q&A on April 2nd
- dossier: 18 issues raised in Q&A (April 2nd) and links to over 70 articles, reports and websites
- All KLU information relating to the corona crisis can be found here – a collection of news, online events, analyses & comments, and expert contacts:
www.klu.org/corona.
Corona Crisis: Analyses & Comments
This news is part of the Corona series of analyses and comments with KLU researchers regarding different aspects of the effects of the ongoing coronacrisis on our daily lifes, the economy, our way we work and more. Find all analyses and comments.