QUESTION TWO
- Using examples, discuss the lessons learned from the Covid 19 pandemic for firms that engage in global value chains (10marks)
A global supply chain is an international system that businesses use to produce and distribute goods and services. This network starts with raw materials and ends when the final product or service is delivered to customers. Many different entities make up a global supply chain, including suppliers, manufacturers, freight forwarders, warehouses, distributors, and retailers. These entities facilitate the movement of information and resources around the world. Most global supply chains span across multiple continents and countries, taking advantage of relatively low materials, labour, and manufacturing costs.
The following are some of the lessons learnt by firms in the global supply chain as affected by COVID-19
Firms have learnt how to have large storage facilities to cater for the supply chain disruptions in case of any pandemic or any other global challenge which affects the supply chain, for example In February and March 2020, more mandatory lockdowns and stay-at-home orders followed across numerous continents, most prevalently in Europe. With extended factory closures in China and Europe, manufacturing delays and supply disruptions were inevitable. In the meantime, consumers went into survival mode and demand for critical supplies like toilet paper and paper towels skyrocketed. Next were medicines, diapers and the entire food supply chain. Between rapid and unexpected demand shifts and the closure of numerous production facilities, out-of-stocks became a standard for retailers. In fact, the average percentage of retail out-of-stocks rose from 9% on a regular week to as high as 65% during the pandemic. Extraordinary demand increases were not limited to consumer goods. Healthcare products like ventilators, respirators and test equipment also experienced a sharp increase in demand with the number of global hospitalizations. The number of ventilators needed which typically do not exceed several thousand a year went up to millions to meet the moment. If the challenge of ramping up production wasn’t enough, many of these medical devices require legacy components are limited in availability. All this volatility amplified the impacts of electronic component shortage worldwide. When production facilities started coming back online in China, many experienced a skilled labor shortage on top of it all. With parts and components on hand, some simply did not have the expertise to carry out the backlog of demand. This factor therefore has taught retailers, manufacturers and the entire business community that there is need to always stock to cater for any disruptions that may happened to the global supply chain.
There is need for proper planning since delays of purchase orders has to be put into considerations. Unfortunately, long lead times can expose your shipments to even longer delays. With so many steps in the global supply chain and such large distances for goods to travel, there’s many opportunities for things to go wrong. As a result, it’s crucial to have firm completion dates and shipping times. It’s also vital to have agreements in place with an organization’s partners that outline what happens when things don’t go according to plan.
Organizations have learnt that they have to build capacity in order to be in position to manufacture some products by themselves so as to rely so much on the global supply chain which is very unreliable in some circumstance when there is pandemic.
Globally organizations have learnt to be Accountable and compliant, Companies have to consider social compliance when doing business internationally. Unfortunately, modern slavery, child labour practices, unacceptable working conditions and unfair compensation are just some of the unethical practices present in global supply chains. As time goes on, there are more and more ways to verify supply chain partners to ensure ethical standards are followed. However, there’s often no way to be certain that everything is above board. Companies must manage the risks associated with these issues: potential brand damage, legal action, and most importantly, the irreparable harm caused to individuals in exchange for profit.
Organization globally have learnt cash flow management; Cash flow management is a serious issue in every business, but it’s a particularly complicated task in global logistics and supply chain management. Businesses must keep track and plan for a complex web of expenses. But with so many entities operating simultaneously, it’s hard to know where and when to allocate for resources. For example, if an Organization spends £10,000 on materials, they need to know how much it will cost to turn them into products and get them into customers’ hands. This process might include shipping, storage, manufacturing, packaging, freight forwarding, distribution, marketing, sales, and more.
Companies have learnt to create buyer-supplier relationship in order to enable them reduces chances of facing scarcity this will enable the suppliers of raw materials inform them of future scarcity so as to enable them plan a head of time. In order to create buyer-supplier relationship organization must involve their suppliers of raw materials in the production process.
Exposure to risk; Many countries providing relatively inexpensive labour and manufacturing costs also typically have less stable governments and currencies. Local changes in leadership and policy can often affect the global supply chain. What’s more, global supply chains are exposed to risks that local supply chains aren’t, such as international policy changes, for example, Brexit. Companies have very little control over these factors, so it’s best to ‘hope for the best and prepare for the worst, Set up prospective agreements with suppliers, manufacturers, and freight forwarders in another region or country to fall back on. You may also want to secure appropriate insurance policies to cushion potential blows.
Quality control and defects; Quality issues can also be challenging to manage. For example, businesses must consider the differences in acceptable defect levels in different countries.It’s essential to clarify the quality level expected and the percentage of acceptable defects ahead of time. It’s also best to define who is responsible and what happens should there be a disagreement in the future.
- Identify and discuss a range of strategy options that can be designed and implemented by organisation to survive demise now and in a future of similar and even much worse pandemics like Covid 19 (10marks)
Plan with the future as well as externalities in mind; Having a macro, globalized vision will help a manager understand the trends and new technologies that can arise at any moment. Looking outside the organization and even having a third-party look inside it is the right way to plan and design a business model, and more specifically, to fit new realities, ensuring performance is in tune with the competition and with other sectors of the market.
Determine the priorities; those who have more than 5 goals, usually don’t actually have any. This is because you want to do a lot of things at the same time and it can be difficult improving business performance in such a complex way. It therefore recommended for business to choose from 3 to 5 clear and objective prioritized goals and pursuing them with the certainty that they can be achieved.
Companies have to adopt information and technology into their management systems to reduce the chances of failure and improve on their communication and information management. The importance of Information Technology in business is vast. It helps each and every business sector in automating their processes and their systems to target objectives, generate revenue and reduce inefficiency of their work. The value of Business information technology is increasing day by day in areas such as in commercial transactions, to fulfill demands of customers and regulatory requirements. The purpose behind Business Information Technology is to fulfill the everyday growing needs of industries and to fulfill the growing expectations of customers of every field. To maintain the balance between complex computer systems and right practices of business, employers eye on sound business information technology. Business IT backs the companies in a hardware system, software, system and all the changes in procedures. With the proper technology management, serving customers more will become really easy as it helps in increasing employee engagement, gives access to information and provides flexibility in responding to business challenges.
The right people in the right places, integrated with strategy and operations; It’s at this point that one understands how culture can be a determinant as a strategy for improving business performance. It is very important to have a culture of collaboration and a reliance on organizational network This is done with people who have this type of profile, which is part of their DNA and is reflected in the way everyone looks for results; combined with an organization that allows it.
