Reimagining the Supply Chain: the importance of seeing the glass half full amid COVID-19

Life is never going to be the same again. The "normalcy" we hope to see at the end of this curfew imposed to control the spread of COVID-19 is going to be in stark contrast to our lives and business practices prior to the breakout of this pandemic. Supply chains crisscrossing the globe are already heavily hampered by COVID-19 and the world is bracing itself for a recession of proportions never experienced in our lifetime. In fact, the International Monetary Fund (IMF) has claimed that this would be the biggest dip in the world economy since the Great Depression experienced in the early 1930s. The Sri Lankan rupee has already nosedived against the US dollar. But these are not times to be hopeless, life always throws challenges in various forms and the ingenuity of mankind has been to riseto those challenges and by being resourceful. This is the need of the hour and I hope to share some thoughts to ponder on strengthening local supply chains to overcome the present and future challenges. 

The effects: short and medium-term

With the curfew in effect to curb the spread of the pandemic, supply chains we took for granted have been stretched thin. While some seem to be enjoying seamless supplies of necessities, there seem to be others having difficulties finding what they want. On the other end of the supply chain, many farmers and fishermen are having challenges selling their produce at a decent price due to the restrictions on movement. The panic buying and hoarding experienced across the country has led to a dearth of mackerel tins and dhal which are subsidized. With factories shut down, the number of inventories of commodities such as cooking oil, packaged milk, powdered milk, sanitary products, etc. may not last forever, especially in view of some people stocking them up. Thus, the government needs to think of strategies to ensure some selected industries are reopened under stringent health guidelines so that we don't go from bad to worse. The six Chair Professors of Medicine in the country had also alluded to this in an earlier letter. 

On the flip side, the pressure mounting on the 1.7 million daily wage earners and the 2.5 million that are self-employed to continue with their lives is enormous. A majority of these individuals would have limited savings and while Sri Lankans have a tendency to help the needy, this might not be sustainable for lengthy stints. Already, India is suffering from this with underprivileged communities resorting to scavenging which could culminate in far worse social consequences. Even when Sri Lanka eventually reemerges from the curfew, most of the problems of these demographic groups are likely to persist since many would not be able to recommence business as usual. 

Already, many Sri Lankan corporates have been forced to make significant changes to how they operate. This includes measures such as wage cuts, loss of customer contracts, dents to the supply chain and unproductive expenses. Perhaps, one solace has been the reduction of overheads which has also got the Ceylon Electricity Board out of jail as well. Business continuity will mean something completely different once the country begins to crawl back to 'normalcy' beyond the 1st wave of COVID-19. Therefore, it is possible that we may see furloughs and even downsizing of staff. This could be exacerbated by the heavy economic toll taken by our traditional export markets such as the USA and the EU which would not be able to buy our products. 

Already, some analysts are suggesting that the USA will require 5 years to return to where they were pre-COVID-19 economically. Moreover, reshoring has been widely accepted in the developed world as the economic stimulus to overcome the economic woes while ensuring that they are better poised for disasters of this nature in the future. In any case, our export portfolio was mostly consistent with primary commodities apart from a few industries we had carved a niche in. Moves to re-shore production to the USA and the EU may push us towards primary commodities. This is in addition to the likelihood of there being less foreign direct investments in the future, dealing us a double whammy. However, rather than being overwhelmed by these challenges, it is important to be resourceful in plotting our way out of this pandemic.

Learning from the rest of the world

Companies around the world have shown ingenuity in stepping up to the plate amid the coronavirus pandemic. Tesla, GM, Ford, Volkswagen, and BMW have already focused their attention on manufacturing ventilators. Meanwhile, over 100 manufacturers in Germany have converted their facilities to produce facemasks. Previously, over 90% of Germany's facemasks had been imported from Asia. USA's oldest clothier, Brooks Brothers, has also responded by moving from luxury fashion to personal protective equipment. You may argue that these are heavyweights based in developed countries and Asian companies can do little to respond. Vin Group of Viet Nam has challenged this traditional Asian mentality by converting its production lines to build ventilators - in fact, 55,000 units per month. Several clothing manufacturers in Asia have also begun focusing on facemasks. 

While in the short-run this is a shift from making a profit to making an impact, in the long-run this provides these organizations the agility and the diversity to survive in the backdrop of COVID-19. With second and third waves being commonly discussed by epidemiologists and virologists, these companies are adding an extra lifeline not only for themselves but to the world. 

Rising up to the challenge in Sri Lanka

Here in Sri Lanka, some companies, especially those who are tech-based have begun the transformation - some more successfully than the others. Others may not find transitioning to catering the realities brought forward by the curfew and the changed demands so easy. In certain cases, it is possible that the company is willing to chip in but lack valuable resources in its supply chain such as reliable suppliers or logistical challenges due to the curfew. However, these challenges could be overcome by developing a fully integrated supply chain within the country. This will go a long way in empowering the community and ensuring that most of the supply chain is closely-knit. It is imperative to focus on jumping up the ladder to producing advanced, value-added products to pushback on the pressures of reverting to primary commodities as a result of reshoring. This would be aided by Sri Lanka having a comparatively well-educated community when compared to regional peers. Thus, our companies can think of revolutionizing their supply chains through the implementation of robust customer-centric solutions powered by trends such aslast-mile logistics, omnichannel approaches. Industry 4.0 applications, sustainability initiatives, data science, et cetera. However, all this requires support from the government to allow the mobilization of necessary resources. I believe the university system also has a major responsibility for becoming beacons of innovations that empower the corporate community. For a longtime industry and academia had had some friction in the country, it is important that both communities embrace each other's strengths and weaknesses for what they are and push for a concerted effort. 

Needless to say, there has been little focus on local logistics in the recent past as well. Nearly 40% of our fresh produce (fruits and vegetables) end down the dumpster. It is also no secret that farmers reap small profits, if any, for their hard work while the consumers in the urban centers pay a premium when compared to the farmgate price. This has led to many millennials, Gen Zsdistancingthemselves from farming. Those who fail to progress through academic avenues often end up driving or owning a three-wheeler which has again given rise to an unsustainable amount of three-wheelers in the cities that have been utterly congested. As a result, Sri Lankans, unbeknownst to them, have become victims of relying on consuming imported commodities that can be grown locally or could be replaced by local produce. It is commendable that the government has identified this lapse and are trying to alleviate it. Hopefully, this continues beyond the curfew and we see less imported food items such as foreign fruits that can be easily replaced with more nutritious local produce. It is also imperative that we find sustainable solutions to empower farmers and resurrect the profession to its former glory by bridging the divide between the upstream and the downstream of the supply chain through a seamless flow of information and better transport and logistics solutions. 

Another positive outcome of the curfew has been the forceful implementation of work from home (WFH) practices. Several academics have long touted WFH/telecommuting and flexible working hours as a solution to alleviate congestion in the cities. However, these calls have often been ignored. While it is true that not all jobs can be performed through such methods, we have found out how effective they can be over the past three weeks. For instance, University of Moratuwa has risen to the challenge and has begun delivering lectures online through Zoom. There are plenty of corporates that use various online tools to ensure their businesses do not grind to a standstill. 

The current context provides fertile soil for us to ponder whether we've enjoyed a case of "excess mobility" where we've been burning fuel (and rupees) unwittingly without much value addition. While it seems logical to ease the curfew laws gradually with distinctions made between different areas depending on the risk factor, employers too can reinvent work patterns by limiting the number of days an employee is required at a workplace going into the longer-term. Percolating all these facts together, one could presume that the post-COVID-19 world can allow us to rethink our travel patterns and enrich people's lives by employers allowing WFH. This would lead to further cuts to overheads and office spaces/rents. The government too would stand to benefit by saving massive infrastructure investments. These are just a few ideas to bite among many more. 

One of my mentors, Prof. Amal Kumarage, often claims that Sri Lanka is a country of "lost opportunities". This is true, Sri Lanka has had many golden opportunities to unite and seize its limelight since our independence from the British. In this millennium, the boxing day tsunami, the crushing of the LTTE and the 2019 Easter attacks came and went. It is our responsibility to make sure that COVID-19 does not become part of that long list. The COVID-19 outbreak leaves our debt-ridden economy weakened but it also gives us the opportunity to think afresh and be innovative. Italy which has been hard hit by the pandemic has been advocating the EU to push for corona bonds and smart diplomacy may allow Sri Lanka to get some leniency on our debt plans. In the meantime, it is our collective duty as citizens, corporate citizens, and academic institutions to do what we can through focusing on innovation. It's also the government's responsibility to ensure that we promote local ingenuity through refreshing policies geared towards innovation that will empower growth. Only then shall we overcome the label of being a "country of lost opportunities".

Dr. H. Niles Perera

Senior Lecturer

Department of Transport & Logistics Management

Faculty of Engineering

University of Moratuwa

hniles@uom.lk