Local Supply Chains Prove Key to Recovery COVID-19 Disruptions

Local Supply Chains Prove Key to Recovery COVID-19 Disruptions

COVID-19 has proven to be the kind of black swan event that pushes industries across the world to rethink their supply chain models. With large parts of the world locking down to flatten the disease curve, it has become clear several countries depend on one singular source for a large number of materials and components in manufacturing – and this dependence has resulted in immense disruption, the fallout from which is highly visible in the international supply chain.

According to a Baker McKenzie and Oxford Economics study entitled “Beyond COVID 19: Supply Chain Resilience Holds Key to Recovery,” the pandemic will bring about a global trade fall of more than four per cent in Q1 2020 and decline further in Q2.

While industries do anticipate a recovery, they also realize the need to have a multi-pronged global supply chain model to ensure future disruptions (such as seen with SARS, H1N1, trade wars, solar tariffs, etc.) are minimal. The focus will be on diversification and quality local suppliers. For the renewable energy sector, the fact remains that clean energy will be the need of the hour.

What the Sector has Going for It:

The cost of fossil fuel is dropping, which gives investors more money to invest in the sector at good return rates of interest. Current demand will ensure that a large number of jobs will be added to the solar and wind project sector pushing local economic growth. A great deal of planning is currently underway to prep for pent-up demand which will be a huge part of pushing recovery in the sector. Here are the things sectors need to do to facilitate this demand and the eventual recovery.

Diversification of Supplier Base:

Working with up to three suppliers across a range of projects, rather than a single source, is the easiest way to mitigate the dangers of single sourcing. With manufacturing opening up gradually across the globe, there is a clear shift of sub-component manufacturing into newer regions like Cambodia and India who are making a massive pitch in setting up manufacturing units for global consumption.

Scout for Local Supply Chains:

These are times for partnerships and it is important to thoroughly vet potential international suppliers, particularly if they have local supply chains and are not dependent on a single source. It can take a long time to set up local supply chains. This makes diversification of the subcomponent supply system very important.

Focus on Personal Relationship Building:

With supply chains primarily originating out of the Asian subcontinent, it is important that relationship building constantly happens at the management level. With face to face meetings not being a possibility, hiring Asia-based advisors, particularly those with strong relationships in the local markets, is essential to business.

Analyze Your Supplier’s Market Vision:

It’s important for every supplier to have a long-term vision. As you seek out new resources, it’s important that potential suppliers and sources be examined on the basis of their track records – and how they have grown to meet their visions. Their roadmaps for the future need to be analysed to understand their ability to respond and adapt to newer trends in technology and situations.

Focus on Independent Third-Party Validation:

Bring in qualified third-party advisors who can weed out defects and assess threats to performance and safety features. These inspectors should be well versed in international compliance measures. With more new suppliers coming into the picture, it is essential that a quality assurance check is in place.

The manufacturing industry has been faced with several challenges, uncertainties and disruptions over the years. The important takeaway from COVID-19 is the need to prepare a plan to navigate the constant changes and adapt to the rapidly changing landscape. The emphasis on local supply chains remains a top priority.

Read More:Coping eCommerce Supply Pattern Changes During COVID-19

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