Supply chain to help revive battered economy | The Daily Star
12:00 AM, July 01, 2020 / LAST MODIFIED: 11:23 AM, July 01, 2020

Supply chain to help revive battered economy

The novel coronavirus originated in China, the global supply chain hub, in late December and has since rapidly spread to all corners of the world, affecting hundreds of thousands of people and imposing significant economic implications.

Bangladesh, a growing economy in South Asia, is no exception and has been highly affected by the Covid-19 outbreak. The pandemic put Bangladeshi companies in a serious crisis and stopped the supply chain flow both domestically and internationally.

As we are in the age of globalisation, the world's supply chain has become substantially more interconnected. Moreover, as emerging market economies have steadily come to account for a greater proportion of global GDP, goods often have more stages to pass through before reaching the end consumer.

From national lockdowns to closed airspace and borders, the Covid-19 pandemic has resulted in an unprecedented disruption of the supply chain for the mechanics of most economies, regardless of their size or stage of development.

In these circumstances and in the days to come, the supply chain has a big role to play in shaping our new lifestyle and getting our economy back on track.

On March 7, the first coronavirus infection in Bangladesh was detected but since then, the number of cases has risen at an alarming rate. The pandemic has had a significant impact on public health and overall economy of the country.

Bangladesh exports, which is mainly dependent on the garment sector (92 per cent), was dented by the situation and to make matters worse, most of the buyers in Europe and North American countries are either halting or cancelling their orders.

It has been reported that the garment sector was slapped with work order cancelations worth about $3 billion so far. This also poses a huge threat to the garment ecosystem.

The backward linkage industries like yarn, fabric, dying and washing and forward linkage industries like banks, insurance, ports, and hotels are also impacted.

As Covid-19 continues to spread worldwide, the entire global economy has been halted, which gives a clear indication to expect a bigger fall in remittance flow with the return of migrant workers in the coming days.

This may significantly impact our economic growth in the near future as well.

On the other side, the crisis might create new opportunities for countries like Brazil, Mexico and certain emerging markets in South-East Asia. It has been predicted that China will be less the 'Factory of the World' after the pandemic.

The reasons why factories could possibly be shifted away from china are numerous.

First, it is because of the widespread shutdown of the factories in China in February and March and mass spread of the virus around the world and its consequences.

Second, the US-China trade war, which already pushed some of companies to move their factories elsewhere and more companies to follow suit after the bailout policy and grant set by the US government for post-Covid-19 pandemic recovery.

Third, recently lawmakers of eight developed countries formed a new alliance to counter China and in the long run, it will accelerate the shift of companies from China to other countries.

US-origin companies are planning to realign their supply chain to closer countries like Mexico and Brazil to mitigate future risk while also diversifying their source to establish supply chain networks in ASEAN countries.

Companies originating from Japan and South Korean are also looking to move their factories from China to set up alternatives in South-East Asian countries.

Fourth, new export potential has been unlocked in the Chinese market.

Starting from July 1, as many as 8,256 Bangladeshi products will get zero tariff facility in the Chinese market. The zero-duty benefit amid the pandemic is expected to bring in new opportunities for Bangladeshi exporters and businesses.

Bangladesh, with its stable economic growth, continuous development in electricity, communications and infrastructural sectors, advantageous geographic location, upcoming economic zones near sea and airports and a youthful population can make the country a very attractive place to relocate.

As the world supply chain is in crisis and offering new opportunities for the developing countries, the supply chain has a big role to play in overcoming the crisis.

The basic fundamentals of the supply chain are to bring smoothness of deliveries and having a wide range of efficient and diversified cost-efficient sourcing along with reduced lead time. These core practices build a chain that leads to manufacturing and delivering excellence.

Through practising core supply chain principles like proper planning, diversified sourcing, which largely means not being limited to a single country, reducing costs and improving savings over the years will help companies overcome the challenges of the coronavirus fallout.

It has been predicted that the practice of the supply chain may be different in the post-pandemic era.

The supply chain practices may change from 'Just in time' to 'Just in case' with goods being produced where most of the consumers are. There will also be more efficient labour cost and creation of more resilience, which itself is expensive.

Keeping the predictions in mind, companies can plan as per their needs and follow the supply chain's upcoming trends to grab new opportunities.

To keep up with the changes in the post-pandemic era and grab new opportunities, the government has a significant role to play.

First, the government should form a committee, comprising experts, corporate representatives, business leaders, educationalists, social media influencers, law enforcement representatives and health experts to sense the upcoming opportunities and design strategies.

Second, Bangladesh's foreign missions can play an active role to promote the country the respective county's business community and, if required, they can also hire lobbyists.

Third, to continuously communicate with the companies who are planning to shift their factories and make investment-friendly package deals for the next 5-10 years will give cost-efficiency and savings.

Fourth, to attract investors', the government may declare tax leniency and suitable bankruptcy and recovery policies.

Fifth, making investment-friendly policies and less administrative procedures will allow companies to easily move goods and services.

Sixth, developing other attributes like land and economic zones apart from focusing only on efficient labour will help investors make long-term shift in the entire manufacturing unit and end-to-end supply chain.

Seventh, there should be more focus on resource skill development programmes.

The world of business is changing and the Covid-19 pandemic has brought a huge change not only in our ways of living but the entire cycle of the supply chain.

Although the issue started through the trade war between two economic giants of the world, the pandemic is adding an entirely different dynamic to it.

As we can only hear news about crisis, loss and uncertainties, we should not be hopeless as every crisis creates opportunities.

It is time for us to understand the magnitude of the impact of the upcoming changes in the global business and the role of the supply chain in recovering from the crisis.

It is time for us to achieve supply chain excellence through which we will attract investments and achieve glorious economic growth in the future.

 

The author is head of supply chain and procurement at bKash

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