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This paper was written by our founder Jeroen Hendriks. He shares advice and delves into the resilience and necessity of Supply Chains. Begin reading this article below and continue by following the link at the end of this introductory section.
Risk management in this time is crucial. If you have limited resources keep it simple; if you can, or have to, take time to analyze deeper. The main risks are insufficient people and cash. Look at them in your own company, at your suppliers and customers, even at their suppliers and customers. Then act. For example: re-negotiate your supplier contracts, reduce your purchasing to the minimum, alter the specifications of your products, produce new products or offer different services, enter new markets, or tie in with your customers. Once you can see the problems coming, there are actions you can take!
And yes, tough times are ahead, but still look at opportunities. Train your staff or reorganize at low to no cost, or, if you have the cash, invest in new technologies, redesigning your supply chain or buying over a competitor. Once you see possibilities, it is possible to come out of this stronger! I look at several factors that you should or could consider while assessing your risk: 1) COVID will have an impact on your supply chain, but how long and how deep depends on the duration and severity of the measures imposed by the government. Where the duration is most probably maximum 12-18 months, the severity will change throughout this period from total lockdown to limited restrictions. There are several scenario’s you could prepare for, but, if you do not have the resources, prepare for the worst. 2) A recession is almost certain, and you should see a recession linked but not the same as the COVID impact on the economy. The COVID crisis will be over by September 2021 latest, but the recession and its aftermath will probably take longer. Again, if you have limited resources, prepare for the worst. 3) The Malaysian government budget will take a triple hit: reduced income due to lower than expected economic activity, increased expenditure due to the stimulus packages, and the reduced oil & gas income due to the low oil price. However, Petronas, the national Malaysian oil company, is cash rich and could support in this time of crisis…if the Malaysian government chooses to use it. 4) Political consequences will be of interest for SME’s with markets abroad because they could affect commercial interests in the short term.
In the long term these consequences could affect everyone, just as the financial crisis from ten years ago is partly the cause of the world today. COVID has most probably had a major impact on your supply chain. And more disruptions, big or small, are surely to come. So stay prepared and keep managing your risk!
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