Without a doubt, there will be many changes as a result of the coronavirus pandemic that started in late 2019.One of those will be in supply chains, writes business expert Bronwyn Reid.
In my book Small Company, Big Business, I wrote about how the #1 priority of people in large companies was to eliminate risks in their supply chain. Risk threatens their positions, their promotion prospects, and their job security. That’s why they wouldn’t buy from you – a small or medium-sized company. You might not be able to supply consistently, or insufficient volume. You might go broke and leave their supply chain damaged or broken.
Hence, B2B became Big Business to Big Business on far too many occasions, when a small and/or local company would provide equal or better products and services.
So, one big company purchases from one, or several, other big companies over a great distance – both in time and kilometres. China, in particular, became the “world’s factory”. Globalisation was the product of the ceaseless search for supply chain efficiencies – to reduce costs and reduce inventories.
Big Business created its own risk.
Ironically, it is exactly that response that has created the biggest risks of all – risks that were unimaginable just a few months ago.
The coronavirus shutdown response exposed the real risk. Across the world, factories closed, aeroplanes and people were grounded, borders closed … The flow of goods and people stopped. All of a sudden, the world was clanging with the sound of breaking supply chains.
What will happen in response?
In response, we can expect those same big companies to be examining their supply chains for the failure and/or choke points.
Here are the main responses that I anticipate we will see emerging.
Stop relying on just one country, or one company for supply. China, as the world’s factory, provides us with clothing, washing machines, iPhones, car parts, artificial sweeteners, water treatment chemicals … and so many more of the things we use every, single day.
Look again at manufacturing in their own country or region. Local (as in within Australia) manufacturing has a whole, new appeal. Other South-East Asian countries such as Vietnam, Malaysia and Thailand are emerging as alternatives to China.
Focus more on buying local. Something as simple as border closures have highlighted the attraction of local companies as suppliers. In our own environmental consultancy, we experienced an upturn in work as our interstate competitors couldn’t cross state borders. Even our competitors from within Queensland were unable, or reluctant, to travel long distances.
Seek out new technologies that will make supply chains much more transparent. I’m sure you will have heard about distributed technologies such as blockchain. These are the technologies that will allow supply chains to cease being a simple vertical flow of goods and services, and give much greater transparency into the murky depts of some supply chains.
And that’s where small business comes in.
This is going to be a monumental shift, and there’s a lot to consider. We SME owners and managers need to be identifying possibilities now – preparing for the end of this recession.
Our challenge is to think critically about the future. What do you think the supply chains in your industry will look like in 5 years? If you say the same as now, I would suggest you haven’t thought about it long enough.
By preparing now, you will be leading the pack on the other side.