17 June 2020

New supply chains emerging from COVID-19

Written by Professor Lenny Koh.

Gloved hand holding a positive Covid-19 blood test

The year 2020 marked the start of a challenge to humankind.

The world witnessed the first discovery of a new virus – the Coronavirus / COVID-19. The first epicentre of COVID-19 was in Wuhan, Hubei province, China; the second epicentre was Europe; and the third epicentre is now in the USA. The global economy is in a ‘lockdown’ because of this Coronavirus / COVID-19 pandemic.

All countries respond with a range of strategies and actions, tailored to their needs and circumstances.

These include injecting trillions of dollars to the market to save the economy and lives, mobilising resources, readapting supply chain and technology, stock piling critical raw materials and products, accelerating research and innovation (e.g. vaccine and ventilators), maximising data sharing and openness, increasing acceptance of digital technology. As such, the global supply chains are disrupted with immense pressure and are undergoing major revolution.

The ability of a country to bounce back quickly from COVID-19 would depend on the supply chain resources efficiency including financial resources, physical resources, infrastructure resources, human resources, data resources, material resources, natural resources, and the interconnectedness of their supply chain resources.

These supply chain resources comprise of environmental, economic, and social capital. By capturing and quantifying these streams of capital for critical cycles of inputs and outputs, we can measure and manage supply chain resources sustainability more efficiently.

Put simply, for instance, a bilateral resources deal between countries enable both to strengthen each other supply chains.

Therefore, it is not just supply chains that compete, but also the strengths of their resources capital and resources sustainability. For example the shortages as a result of increased demand we are currently facing right now from COVID-19 are ‘temporal outcome’ of resource scarcity due to fragmentation of resource capital, inefficient resources management, and non-resilient supply chain resources sustainability (i.e. lack of such resources deal).

By identifying and managing the interconnectedness and overlaps in resource cycles will optimise the overall supply chain resources sustainability of specific product/service supply chains.

This can be clearly evidenced in the way that organisations and nations converge their resources, capacities, capabilities and supply chains to address the COVID-19 challenges.

For instance, the production of the urgently needed ventilators to save lives - the Ventilators Consortium in the UK including Rolls-Royce, Airbus, F1 etc. and the major industry-led and federal government-led effort in the USA including Ford, General Motor etc.; the construction of temporary hospital in 10 days (Nightingale) at Excel London from NHS and construction workforce, military engineers, logistics and transport firms and volunteers; and the fast mobilisation of doctors and nurses and personal protection equipment (PPE) between cities to the epicentre in China and the national level ‘lockdown’ enforced with strict monitoring.

These are case evidence of how resource efficiency and supply chain resource sustainability are practised.

Economists have predicted that COVID-19’s impact on the global economy will be 10x bigger than the 2008 Asia financial crisis. World Economy Forum has compared the global economic impact from COVID-19 to a global economic depression (not a recession).

However, some economists predicted that the global economy will bounce back in the 4th quarter of 2020, recovering from the current nosedive of stock markets.

If China’s growth is 6% as predicted for 2020, then global market will be in a less worst scenario. The new world needs to prepare for the recovery from this global economy slowdown by accelerating the expansion of global supply chains but with the requirement to grow within the resources boundary.

It is absolutely key that all policy makers and industries globally must collaborate to see the role of resource efficiency and supply chain resource sustainability embedded in everything.

A world where decisions are made with the above in mind, improving supply chain resource forecasting, utilisation, and conflict resolution decisions, and contributes toward translating macro-level sustainability targets into specific production and operations objectives.

More of these type of new supply chains will emerge from COVID-19 with win-win-win (economic, environmental and social) characteristics.

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