- March 18, 2020
- Posted by: Archi Bhardwaj
- Category: eCommerce Industry
The coronavirus pandemic has forced thousands of companies to disrupt operations or shut down completely due to the shortage of their supply chain. Reports of the horrific effect of the Covid-19 outbreak not only show the peak of impact on companies, downsizing of manufacturing plants but resurfaces how the world relies on China for parts and materials for their businesses.
One of the biggest pandemics after the Spanish Flu or the recent SARS epidemic, which too originated from the Guangdong province of China, the novel coronavirus has spread its effects into 140 countries and as claimed over 6500 lives till now. The worst affected countries apart from China, include Italy, Iran, South Korea, Spain and Germany.
With the scarily increasing death toll, the virus has halted the supply chain and manufacturing operations around the globe and the situation continues to deteriorate. The well-known importance of China as the top provider of supply and manufacturing has now been tarnished and international as well as national suppliers and manufacturers are forced to reconsider where to invest for the production of their goods.
This worldwide public health emergency has pushed out the need for some strict methods to prevent and contain the spread of the virus. The guidelines provided by the World Health Organization includes refrainment from social and business gatherings causing workplaces to rethink the way to operate. Big to small companies have gone the remote working way advising their staff to work from home and maintain a streamlined process of being well connected on their phones and on the internet so as to not cause big blows to the company profits.
Due to all these reasons, companies have found themselves under tremendous pressure to optimize supply chain in order to reduce supply chain costs and maintain a steady flow of operations. If effective strategies are not put in place, there are high risks of manufacturing being halted completely due to the shortage of goods. Finding out ways to directly monitor the areas where companies receive and provide supplies is of crucial importance. Not understanding and working swiftly on the impact of the COVID-19 can make companies bare huge losses.
Impact on Industries and Businesses Worldwide
All industries that depend upon the supplies and parts from overseas, especially from China have and may continue to see the adverse effects. Textile and Apparel industries worldwide have seen a rapid dip in their profits as factories have halted production and lockdowns on borders may only add to the fume. The only positive side for this industry is the current stocks of summer and spring collections that may delay the losses by at least 5 to 6 months.
Smartphones have hit the rock bottom as the biggest suppliers of all parts and pieces for big companies including Apple, and manufacturers such as Xiaomi all depend on the Chinese market. While Apple has declared low profits due to supply shortage, others can feel the effect as locally developed products from China are not currently in the buying lists of customers.
Large goods such as televisions, air conditioners, washing machines, etc., have been at the lowest of demand
As the government announces to lockdown malls, movie halls, and encourages restrictions on gatherings, the impact on overall sales may shift from offline channels to online marketplaces. Large eCommerce platforms such as Amazon, Flipkart and other etailers may find themselves in the midst of fulfilling demands, carrying out rapid deliveries all while facing a shortage of products due to closure of manufacturing and distribution facilities worldwide.
While the increased online demand may shoot up profits, logistics operators may encounter huge difficulties in completing order delivers. As the safety of workers and delivery personnel will remain paramount, companies will have to restructure their shipping priorities, transform from fast shipping to well-quarantined shipping and ensuring no touch on delivers, even for payments may work.
eCommerce businesses can expect unpredictability in profits as demands may skyrocket but the fulfilment of the same may remain the consistent issue until supply operations go back to normal.
The FMCG industry is also highly affected by the COVID-19 as demands for outside food, irrespective of how hygienic it has declined to the lowest. In cases of lockdown, restaurants and food outlets are all closed leaving no options for food purchases and deliveries. However, grocery shopping remains the highest priority due to the time period the crisis may last. Online grocery stores may need to provide support to customers in this time of crisis by providing discounts, EMI or other payment options.
Preparing for a Long Fight Against COVID-19
Seeing the effects of the coronavirus, it is not wrong to say that the effects may persist for a long run and companies need to develop ways in order to not choke under the pressure. Taking up precautionary measures and following strict guidelines can help cope with the crisis.
Consider the Safety and Well Being of your employees
To deal with an unforeseen and uncertain phenomenon as such, it is required by the companies to start from where they are. Not forgetting the simple fact that employees are of the utmost importance, companies need to make sure that they provide a safe and well-sanitized environment for workers.
If there are employees stuck overseas, it is the duty of companies to not only make sure of their well being but connect with higher authorities to ensure safe returns.
Providing the provision to work remotely may not only ensure employee welfare but also shows the strength of a company to trust its employees and handle such a situation with warmth.
Imagine Worst Case and Develop Strategy from there
Once there is trust and a feeling of being in this together, companies can pan out strategies and play out worst-case scenarios to be ready and tackle whatever may come.
It is not a surprise that every crisis brings in with itself the unexpected and for a pandemic like the novel coronavirus, keeping in mind the widespread effects and the inevitability of loss is only rational to put into perspective.
The basic of all can be inventory challenges like shortage of inventory levels and lower supplies causing losses.
Go Back to Basics and Work for the Future
The most important part of rising from such a push back is to go back to the basics and grow slowly from there. During the shortage of material and unfulfillment of demands combined with half stacked profits, businesses may need to focus and design a process to not only deal with the situation now but for future crisis as well.
Developing an emergency supply chain centre or a setup with emergency stocks should be created. Once you see how the profits dropped you can focus on identifying all the areas of your business by understanding which ones of your suppliers and manufacturers were from the list of the worst affected areas. Create a war room for finding out the key areas of work and how you can distribute your supply chain to various facilities instead of just one.
Start looking out for options locally, as this is the current need and the only solution. Rethinking how material can be freely imported and exported globally, how local market places can be focused upon, and how the supply disruptions can be controlled.
Know that risk in business is inevitable, you may always be at risk of epidemics, political storms, climate changes, economical curveballs and technology advancements, all of which may affect you in some way or the other. Making sure you always have an emergency backup, capacity to hold off losses for a significant period of time, distributing sources and most importantly finding a local source for business.