Supply chains tend to be interconnected and complex that events like natural disasters or disease outbreaks lead to supply chain disruptions. With that said, COVID-19’s effects have been felt on an economic level.
COVID-19 is a new type of coronavirus that has quickly spread around the world. This disease is highly contagious and spreads through person-to-person contact. In Africa, over 300 000 people have been infected by this virus. COVID-19 has resulted in many production shut downs and many supply chains have been disrupted. These closures have also had ripple effects on global economic sectors. Africa has felt the full impact of this and has had to adopt strategies in order to control and manage the effects of this humanitarian crisis.
Supply Chain Disruptions in Africa
The impact of COVID-19 in Africa is very serious given the fact that the continent heavily relies on China. Due to Africa already having a weak healthcare system, the continent will face heavy economic consequences. The outbreak has led to a decline in short term growth in Sub-Saharan Africa as countries there export large amounts of commodities to China.
Since China shut down its manufacturing centers and closed some of its ports, Africa has experienced a decrease in demand for its commodities. This impacts the continent negatively as China is Africa’s biggest trading partner. Since the demand has declined for importers in China, they have had to cancel orders. Africa now has to supply commodities at cheaper rates elsewhere.
Africa is heavily focused on exporting natural resources and due to manufacturing sector closures in China, there has been a decline in demand for those resources. This is set to negatively impact countries such as Nigeria, Zambia and Ghana. These countries have had to reduce their outlook on the demand of their natural resources due to the virus.
African countries also import from outside the continent and they mostly import industrial machinery, manufacturing and transport equipment. The disruptions caused by COVID-19 has created a decrease in manufactured goods and this has created supply chain disruptions for multinational companies, raw material shortages, increased costs and reduced orders.
Supply Chain Defense
Clearly defined plans help to deal with the disruption caused by COVID-19. Companies should act quickly to assess the implications they may be faced with to create a plan to reduce risk while remaining operational. The following insights can support Africa through the recovery journey of the supply chain disruption caused by COVID-19:
- Identify key suppliers – Companies need to understand who their suppliers are and understand that they are all connected. In order to do that they need to make a list of who their most important suppliers are, where they are located and understand that what impacts them will also impact you.
- Build a diverse network of suppliers – Once companies locate where their suppliers are based, they will be able to see which suppliers in a region they rely most on. Companies need to diversify their suppliers in terms of regions and multi-source in order to avoid risks. They should also focus on using local suppliers.
- Follow due process in procurement – The process of looking for a new vendor is very time-consuming as you need to ensure that you do quality controls. Due to COVID-19, companies are rushing the process as they are desperate to receive stock. This has led to some companies partnering with suppliers who have defrauded them. To avoid this, businesses must still follow their procurement processes as it might cost them more in the end if they disregard it out of desperation.
- Plan for continuity – It is essential that companies research their suppliers as part of their business continuity plan. They should be aware of who their suppliers are, what services and products they offer as well as how reliable they are. Once this has been done, you can risk rate them based on the criteria.
- Understand new technology – Companies should use this time to learn about new tools in technology that they could use to improve their businesses during COVID-19 as well as in the future.
- Embrace new technology – Companies should not only use new technology during COVID-19, but also embrace it and make a full transition. Once this happens, they are more equipped to better manage their risks.
- Be open in your communication- The supply chain disruption created by COVID-19 can create the risk of reputation damage. Companies should create a clear strategy that would entail transparent communication with their customers, stakeholders as well as their supply chain. This could be the difference between their company gaining competitive advantage or destroying their image.
The impact of COVID-19 has been greatly felt and has also been inevitable. Companies should take proactive steps to manage supply chain disruption and should be agile and reconsider business models post-COVID19.