Effects of COVID-19 - Industry
I wouldn’t even know how to assess the final industry impact of the current coronavirus on global industry. Many industries that rely on “people” will suffer because workers can’t come in to work; some will prosper (e.g. food delivery). One industry that I looked at was the travel and tourism industry. This time, I thought it worth looking at the global garment industry, as clothing is something many take for granted. Both are linked into the global supply chain.
Suppliers to chains worldwide have found the game has changed. Buyers are cancelling orders or asking for significant discounts. According to one producer in India “Brand focus on share price now means some of them don't have money for this rainy day, and are coming to the weakest link in the supply chain, asking us to help them out when they could be applying for a bailout from the US government stimulus package."
Garment manufacturers have been hit hard by two major issues related to coronavirus lockdowns:
- Problems started in February when factories couldn't get the raw materials they needed from China, the world biggest exporter of textiles, which accounted for some $118bn (£67bn) in 2018.
- As China's textile factories reopened in recent weeks - giving garment manufacturers hopes of getting operations back on track - demand collapsed as retailers were forced to shut their doors after governments around the world imposed lockdowns.
Although China may be known as the “factory of the world”, when it comes to clothes, Bangladesh, Indonesia, Cambodia, Vietnam and Myanmar play a growing role. As production costs in China have increased over the past decade, manufacturing has moved away according to Stanley Szeto of Lever Style (suppliers to brands such as Hugo Boss, Theory, Vince, and Coach, Bonobos, Stitch Fix, Everlane).
Bangladesh and Vietnam are amongst the world's four largest exporters of clothing, accounting between them for 12.4% in 2019. Some 90% of Bangladesh’s exports come from garment exports, and the country’s garment industry employs four million workers. Cambodia and Sri Lanka also rely on the garment industry for more than 60% of their exports. The garment industry provides over 50% of manufacturing jobs in Bangladesh, 60% in Cambodia. A little-appreciated fact is that it constitutes an important employer of women, according to the BBC.
Suppliers first couldn’t obtain textiles from China. Now they have orders cancelled. Retail chains can’t sell due to social distancing and lockdown rules.
Now apply this to other industries. The “developed” world will suffer, but poorer countries will be hit the hardest. For their populations, relatively low paid (and, in some cases, dangerous) jobs are all that stands between them and starvation due to fragile healthcare systems and lack of social safety nets in their countries.
We need to be planning for other scenarios that may be just as bad as (if not worse than) the current coronavirus pandemic. Cash reserves and the ability to provide goods/services remotely (i.e. online) will be key to survival.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Crisis Management, Leadership, Strategy, Teamwork
Effects of COVID-19 – Travel & Tourism
I’m watching and learning from global reaction to the spread of the COVID-19 pandemic. There’s no doubt that some countries have handled it better than others. The time for “blame games” and recriminations will come later; let’s first learn from the different types of “fallout” we’ve seen. My first article was on “Social Fallout” and last week I wrote about “Supply Chain Fallout”. This time I’ll look at Travel & Tourism.
The first major event (in China), was the grounding of all transport: buses, trains, aircraft. This spread to other countries as they, in turn, understood the need for maintaining social distancing, people stopped travelling and the demand for transport dried up.
One could also say that testing of inbound travellers started to happen about the same time. Taiwan, it is said, was checking arrivals from Wuhan back in December 2019, as they had already heard through their contacts on the mainland that “something was going on”.
Cruise lines were among the first victims of the pandemic after calling in to ports where infected cases already existed. The Diamond Princess was the first vessel to declare an emergency, but now has only 13 active cases on board, compared to the total diagnosed of 712 (many will have been repatriated and perhaps shown symptoms after reaching their homeland). Since then, cruise lines have suspended voyages and laid up ships.
Airlines grounded flights. Singapore Airlines has 98% of its fleet on the tarmac. Others have gone into administration thanks to a combination of high debt, low revenues resulting from the pandemic and (in some cases) over-aggressive expansion. International visitors have been banned from many countries
As a result of the drying up of tourists, hotels and tourist sites emptied. Disneyland in the US has furloughed thousands of employees.
Restaurants, souvenir shops, tour guide services: all have lost out. Some are closing, many more will as they see their incomes dry up, unless government aid can keep them afloat.
Countries that depend on tourism will suffer the most. In ASEAN, Indonesia, estimates a $10billion loss in revenues, with the island of Bali suffering in particular. Myanmar, wracked by ethnic conflict, predicts a 50% drop in tourist arrivals whilst Thailand forecasts a 50% - 60% fall. With tourist spend accounting for up to 11% of its GDP, this is serious. Vietnam sees a loss of $3-4billion.
Hospitality industry workers are all suffering. Without tourists, hotel guests, diners in restaurants, souvenir buyers they have nothing to do, and yet must remain ready for the time when restrictions are eased, aircraft take to the skies and cruise ships dock at their ports. For some countries, travel, hospitality and tourism will be the “kick start” that their economies need.
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Crisis Management, Leadership, Strategy
Effects of COVID-19 – Supply Chain Fallout
I’ve been watching and learning from global reaction to the spread of the COVID-19 pandemic. There’s no doubt that some countries have handled it better than others. The time for “blame games” and recriminations will come later; let’s first learn from the different types of “fallout” we’ve seen. Last week, I wrote about “Social Fallout”; this time I’ll look at “Supply Chain Fallout”.
One thing that has become clear is that, as governments order social distancing and lockdowns, the supply of goods and services slows down and, in some cases, comes to a complete halt. Even if one plant is working, it may not be able to obtain supplies of raw materials from its overseas supplier who will still be in lockdown. I see countless banners on the homepages of companies that do huge amounts of e-business, stating that fulfilment of orders will be slower due to COVID-19 restrictions on social distancing. When it comes to certain “non-essential items”, that may be acceptable.
To start with, medical supplies - particularly Personal Protective Equipment (PPE) - are in short supply. Most Crisis or Business Continuity Plans rely on diversification of supply sources to ensure that, if one source of supply isn’t available, others can pick up the slack. The US, for example, relies on three manufacturers for extraction reagents; all of them failed in the face of unprecedented global demand arising from COVID-19.
Medical services in most countries are overwhelmed. Again, taking the US, its health-care system assumes that unaffected states can help beleaguered ones in an emergency. That works in cases where disasters (e.g. hurricanes, wildfires) are located in one area only but not for a pandemic that now covers the whole of the US. Similar situations exist in other countries.
Companies and countries have “offshored” various processes and services (the UK’s use of a third party agent to collect documents for those applying for a visa to come to work or study in the UK is an example) but these same third parties will also be unable to work “as usual” as their own workers fall ill or are required to observe lockdowns or care for infected family members. Another example are the “seasonal” workers (usually from Eastern Europe) who come every year to harvest at the UK’s farms. Vital medical supplies (manufactured for the most part in China) have been unavailable until recently due to factory lockdowns. Alternative suppliers have also been impacted.
As a result, companies and countries may look at “re-onshoring” jobs and processes (especially where these are outsourced to just one overseas supplier) and to diversifying their supply base – even at the cost of reduced “efficiency”. These organisations will have to be prepared to bear higher supplier prices (and the reduced profits resulting therefrom) unless buyers are happy (or have no choice but) to pay higher prices.
Some will benefit from this “re-onshoring” in terms of jobs returning to their country. The Boston Consulting Group has commented that robotics and other new approaches to manufacturing make the case for moving factories closer to home more appealing because they reduce the cost difference (source: The Economist 09/04/20). This may, however, be at the expense of workers in low labour cost countries who may see jobs disappear.
The range of changes IT makes possible will is likely to increase - that is the essence of the second current of post-COVID-19 acceleration. Many workers are able to work from home instead of an office thanks to digital connections with and between hundreds of millions, or billions, of people. “Big Data” has proven valuable in tracking infection cases and may well become more pervasive (at the expense of individual privacy, perhaps?).
Businesses that are already onshore and that rely on personal contact will benefit from IT changes. They are having to find new ways to deal with clients. Teleconferencing, remote learning and online ordering and delivery services will grow as, after prolonged periods of enforced lockdown, people realise that they don’t need to go to a physical office or store. Expect high streets to become emptier…
How can we “virus proof” our supply chains for the future?
I’ve spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Crisis Management, Customer Care, Financial, Leadership, Strategy
Effects of COVID-19: Social Fallout
I’ve been watching and learning from global reaction to the spread of the COVID-19 pandemic. There’s no doubt that some countries have handled it better than others. The time for “blame games” and recriminations will come later; let’s first learn from the different types of “fallout” we’ve seen, starting with “Social Fallout”.
Isolation:
There’s little doubt that early isolation of individuals from potential carriers has been one of the key strategies in containing the spread of the virus. With fewer people circulating, transmission may be reduced, and health services will have more time to care for the truly sick as well as to find antidotes. The downside is that those who are more vulnerable in various ways may be left isolated. Balance of risk needed here.
Be Prepared:
One of the results of the sudden “lockdown orders” we’ve seen is panic buying. Toilet paper, hand sanitiser, surgical masks and disinfectant have flown off supermarket shelves with some individuals buying what are clearly excessive amounts. From a very early stage in my parents’ marriage, they learnt to have at least two-weeks supply of essential items at all times in the house: food, consumables, cooking facilities (in case the mains electricity went out).
Support Services:
Call centres, banks and other services may find they are unable to cope with the “usual volumes” of calls due to social distancing rules imposed by government. This could affect the more vulnerable members of society most adversely.
Inequality:
Inequalities will widen. People with low incomes will be hardest-hit by social-distancing measures, and most likely to have the chronic health conditions that increase their risk of severe infections.
… And Social Levelling:
People whose privilege and power would normally shield them from a crisis are facing quarantine, testing positive, and losing loved ones along with everyone else. Senior government officials are falling sick. The consequences of defunding public-health agencies, losing expertise, and stretching hospitals are no longer manifesting as angry opinion pieces, but as overwhelmed health care staff and the unenviable situation of doctors having to decide who lives and who dies because of limited medical equipment.
Increased Creativity:
As we are “confined to barracks”, people come up with novel ideas for entertainment, exercise and staying in touch. The “COVID period” will see development of novel solutions and new services as well as increased usage of home delivery and diagnosis techniques.
I've spent more than half my life delivering change in different world markets from the most developed to “emerging” economies. With more than 20 years in international financial services around the world running different operations and lending businesses, I started my own Consultancy to provide solutions for improving performance, productivity and risk management. I work with individuals, small businesses, charities, quoted companies and academic institutions across the world. An international speaker, trainer, author and fund-raiser, I can be contacted by email. My website provides a full picture of my portfolio of services. For strategic questions that you should be asking yourself, follow me at @wkm610.
Labels: Crisis Management, Leadership, Productivity, Social, Teamwork
