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How You Can Prepare The Supply Chain In The Times Of Covid-19?

How You Can Prepare The Supply Chain In The Times Of Covid-19?

Covid-19 pandemic has brought economic activities to a grinding halt

The current crisis has exposed the over-dependency on China as a manufacturing and supply chain hub

India should move fast and consolidate its gains diplomatically

Over the last few months, the Covid-19 pandemic has been wreaking havoc on the word order. None of us have lived through a time like this in living memory. Millions across the globe have been infected, and fatalities continue to rise unabated. To combat the spread of the pandemic, countries have resorted to imposing nationwide lockdowns to flatten the curve.

While the lockdowns have proven to be effective in arresting the growth of the pandemic, the economic fallout of these lockdowns has been staggering. The Covid-19 pandemic has brought economic activities to a grinding halt. Most industries, including textiles, chemicals, steel, pharmaceutical and automobile industries, have cut production to minimize losses and stay afloat during these uncertain times.

The slowing economy has led to millions of people losing their jobs and due to the cyclic nature of the economy, the reduced velocity of money has further worsened the situation. Experts and economists are struggling to put a number to the losses incurred by businesses the world over.

It is unclear how long this pandemic will draw out for, but one thing is for certain, it’s going to be a long and tough road to recovery.

The UN Department of Economic and Social Affairs (UNDESA) has acknowledged the fact that the pandemic has upset supply chains and international trade, forcing the global economy to contract by up to 1% or more than $1 Trillion in 2020.

The International Monetary Fund has stated that the outlook for global growth for 2020 is negative and that it’s nearly impossible to predict when the economy will rebound. Never ever has the world been in such a lockdown mode.

The global lockdown has unleashed upon us the worst economic downturn since the Great Depression. These lockdowns have severely restricted the movement of goods across borders, hampering established supply chains, both domestic and international. To make matters worse, some countries have imposed bans on import/export of essential items such as protective gear, masks and medicines.

While it was common knowledge that China was the factory of the world, the current crisis has exposed the over-dependency of various countries on China as a manufacturing and supply chain hub for essential commodities.

China also happens to be the world’s largest supplier of medical PPEs. However, even their manufacturing and supply chains haven’t been able to escape the vagaries of the Covid related lockdown with many factories reporting limited labour availability and resource shortage. The extreme stress on the manufacturing set up has also led to production quality issues.

When European nations sought help with the import of protective gear and Covid testing kits, Chinese imports did not live up to the expected quality standards. The Netherlands, Spain and Turkey have rejected PPE Kits imported from China as they failed to meet the safety and quality standards.

The Dutch health ministry too was compelled to send back 600,000 face masks shipped from China as they were found to be defective. The supply of sub-standard and faulty protective gear and testing kits from China has forced countries to ramp up indigenous production of these items.

The Indian government has taken notice of these quality concerns and encouraged domestic players to up the ante. The Indian Railways recently announced that it would begin large-scale manufacturing of personal protective equipment(PPE) kits to ensure that healthcare workers are adequately equipped to fight the pandemic.

In order to ramp up testing efforts, India has empowered its apex research bodies and institutions to find solutions locally. There has been a positive development in this regard. The Indian Council of Medical Research has granted the license to South Korea’s diagnostic kit manufacturing company SD Biosensor to make rapid antibody test kits at its Manesar plant in Haryana.

The company aims to produce 500,000 testing kits per week, and this would augment India’s efforts to implement large-scale testing at Covid hotspots. Extensive Covid testing has to be done in tandem with the availability of the right medicines to ensure infected patients recover soon.

The vaccine for Covid-19 is still many months away, but other medicines like the anti-malarial drug Hydroxychloroquine are being studied as possible treatments for Covid-19.

Although these drugs have not yet been approved by the FDA for this use, they have proven to be effective in helping patients recover quickly. China happens to be the leading producer of the active pharmaceutical ingredients (APIs) used in Hydroxychloroquine, but it is not able to cope with the surge in global demand.

In light of the current situation, India has strategically ramped up the production of the anti-malarial drug hydroxychloroquine and is now exporting it to more than 50 countries.

India should move fast and consolidate its gains diplomatically, pushing for favourable trade treaties to support its domestic supply chain. Countries have realized that there is a pressing need to bolster their domestic manufacturing and supply chain. An agile and robust domestic supply chain network is necessary to de-risk from disruptions to the global supply chain. It’s also time for countries to re-evaluate their investment strategies from a geo-political standpoint.

Japan has initiated the process of decoupling from China by helping Japanese firms shift their production units out of China. Japan has set aside a massive $2.2 Bn economic stimulus package to help Japanese manufacturers move production out of China as supply chains were severely disrupted with the leading trading partners of Japan.

The Covid-19 crisis offers a unique opportunity to India. It can emerge as the next manufacturing hub.

Several countries have expressed the desire to shift their production out of China to other countries. This shift will translate to massive foreign investment and provide much-needed sustenance to the Indian economy. In the post-pandemic era, it’s imperative to ensure that domestic supply chain networks are strengthened and made competitive to put India in pole position. With significant investment-related incentives and policy changes from the government, India will be able to make the most of this opportunity and emerge stronger than ever.

Note: The views and opinions expressed are solely those of the author and does not necessarily reflect the views held by Inc42, its creators or employees. Inc42 is not responsible for the accuracy of any of the information supplied by guest bloggers.