The economic impacts of the COVID-19 coronavirus were swift. As countries around the globe responded with shutdowns, demand for some goods and services plummeted and skyrocketed for others. Businesses scrambled to understand and mitigate their risks, which stretched from the point of service delivery to disruptions deep within supply chains.
Now it appears the initial response phase is coming to an end. Unemployment claims in the U.S appear to have bottomed out. The service economy is showing signs of life, and data reported to the SupplyShift platform show supplier sentiments are trending in a positive direction.
On March 17, we launched a no-cost COVID-19 Impact Assessment to help businesses identify suppliers at all levels of the supply chain and assess the impacts of COVID-19 on their operations. Since then, close to 100 companies have registered for the solution, and hundreds of suppliers have shared their responses on how COVID-19 has affected operations.
Of the companies surveyed since March, 43 percent reported that they were running at 81-100 percent of capacity, and 14 percent reported that they were actually operating at more than 100 percent of capacity. Employee availability remained relatively high throughout the period, with 68 percent of respondents reporting employee availability of 90 percent or higher.
For suppliers that did report lowered capacity, the three main reasons cited were government-mandated shutdown, reduced demand, and supply chain disruptions from their own suppliers. Overall, respondents maintained an optimistic outlook, with over half expecting the main impacts of disruption to continue decreasing over time.
If recovery from the crisis is indeed underway, what will it look like? One of the most common perspectives regarding business and society is that life will not return to the way things were before COVID-19. So let’s round up some of the emerging supply-side strategies and considerations.
Reopen safely – Manufacturing still represents 11 percent of U.S. economic growth and eight percent of employment. Some of this capacity never slowed down, but much of it will need to be brought back online with great care, McKinsey partner Kweilin Ellingrud writes on Forbes.com. She says protecting the workforce, ensuring business continuity, and driving productivity at a distance are the keys.
Planning for shortfalls – In order to avoid being caught off guard again, vendors are preparing now for future disruptions due to regional resurgences of COVID-19, or other crises. Establishing clear decision criteria for managing supply shortfalls is necessary, according to this recent article on MIT Sloan Management Review. The article suggests six tactics for determining who gets what when companies are unable to fulfill all orders.
Rethinking inventory and origination – Consumer goods companies are questioning the wisdom of maintaining lean inventories and sourcing from suppliers in distant locations. At the same time, the collapse of demand for goods is threatening the viability of shipping firms, according to the Financial Times, which notes the compounding difficulties of reduced air freight capacity and quarantine restrictions on ocean vessels.
Made in India – If firms are looking to reduce their dependence on Chinese manufacturing, where will they turn? India is the natural choice according to this Harvard Business Review article. It points to the country’s well-established trade relationship with the U.S., English-speaking population, low-cost labor, and growing middle class.
More sustainable investing – Impact investing was on the rise before COVID-19 and the recent racial justice protests. This Morgan Stanley analyst expects the trend to accelerate with bond financing and green requirements for stimulus funding. He also expects investors to be more focused on resilience and social issues. Similarly, this Forbes contributor says 70% of the S&P 100 are now publicly highlighting ESG metrics to shareholders.
Double-down on climate – Human health and planetary health are inextricable, says Lise Kingo, CEO and Executive Director of the United Nations Global Compact. Her organization has rallied the CEOs of more than 160 of the world’s largest corporations to remind their peers and policymakers that we cannot lose even a year of climate action. The campaign, explained here on GreenBiz, proposed six steps to shape the recovery towards an economy with net zero emission.
Ultimately, the recovery will depend on public health variables that continue to evolve, as well as regional infrastructure, preparedness and leadership. SupplyShift has teamed up with two organizations to improve the usefulness of our COVID-19 Impact Assessment. Moody’s Analytics will now supply the platform with a live feed of coronavirus-related news by company. Verisk Maplecroft will supply metrics that assess the fundamental capacity of countries to absorb and adjust to the changes brought on by COVID-19.
We’re extending access to the no-cost solution through the end of July 2020. Learn more here.