COVID-19 implications for MENA supply chain
May 16, 2020
The COVID-19 pandemic has tested the most resilient and agile supply chains and will continue to do so long after it reaches the peak of its dominance. In the MENA region, this has called for unprecedented measures to mitigate the impact on import and export commerce in the region. Whilst the measures taken to control the spread are supported by local Governments, there are processes that supply chain departments can implement to manage the risk to trade and limit the exposure of their business, at the same time as maximising potential opportunities.
By now many companies will have rolled out their business continuity or disaster recovery plans in an effort to minimize the impact to their business. Suppliers will have informed their supply base of the measures in place to manage the flow of goods and services during this uncertain period.
Companies should work with their most important suppliers to identify ways to collaborate and develop opportunities.
Action Steps:
1) Identify Priorities
Work closely with your operations team to identify your greatest business needs and identify your key suppliers. Reach out to your contacts so that both parties can communicate their needs and local restrictions. Keep your key suppliers up to date with the situation in the UAE – it is up to you to let them know whether or not you can still accept delivery. Providing your suppliers with current status reports from UAE ports of entry is a win-win situation and will help you and them to stay in business.
Crisis can bring out the best in any relationship through good communication. Reaching out to suppliers and to clients to understand their needs can build a co-operative spirit between the parties which helps to generate innovative solutions.
For any business renting commercial premises a quick win can be discussions with landlords for possible rental reductions and deferments. Review your leases and consider whether moving to a new space temporarily or permanently could be more cost-efficient. By now employees have adapted to remote working, how can you take advantage of this model going forward?
2) Identify Where to Cut Losses
At the same time, a business should also assess where to cut losses. Take a look at the contracts or purchase orders which either you or the other party cannot perform. In a global situation such as the current pandemic, both parties to an agreement may wish to cancel or defer performance. This is not a time for bringing legal claims or opening up disputes. Search for common ground with your business partners to resolve any issues amicably.
For the retail sector this will mean reviewing any future orders and OTB (open-to-buy) - work closely with vendors on future orders. Any orders that have not started production can potentially be cancelled.
Analyse business strategies for re-opening and provide clear but realistic targets, aiming to limit losses as far as possible.
3) Inventory Management
Review your inventory to reduce any impact from port delays. For each stock category consider the how the following factors will be affected by the pandemic and shutdowns:
- Country of manufacture;
- Minimum order requirements for fast moving stock;
- Replenishment levels;
- Mode of delivery;
- Expected time from order to delivery;
- Perishability; and
- End user demand.
Government restrictions on business can change suddenly. Inventory should be reviewed at a high-level on a weekly or daily basis while the pandemic continues. Adaptability is key to managing stock and cash-flow.
4) Streamline shipping processes
Make sure that your supply chains remain intact, and that goods can be transported and delivered through the most appropriate means on time and in full.
When shipping goods by container, it’s important to utilise all means available to ensure shipping documentation required to import goods at the end destination arrives on time.
The bill of lading is one of three important documents required to import goods at the end destination and must arrive before the container ship arrives at the port.
One method to guarantee a swift delivery would be to surrender the bill of lading by telex if the airport at the end destination is not operational or receiving commercial cargo.
The remaining shipping documentation required to import goods, i.e. commercial invoice and packing list (see Prism Members Tools) can be sent to the clearing agent by email. This streamlines the delivery process and helps avoid unnecessary delays in a congested seaport, whilst reducing the risk of incurring demurrage.
5) Consider Alternatives
Explore alternative routes to support your supply chain requirements if your usual partners cannot assist you at this time.
Employ proper due diligence checklists (see Prism Free Tools): quality suppliers will be delighted to win new business at this time and will be happy to assure you of their credentials. If you have identified a new but untested supplier, and your due diligence survey has not been satisfied, then conduct a full cost-benefit analysis before proceeding. A supplier who cannot deliver at the required standard may end up costing more than waiting out a delay from a trusted supplier.
This is a great time to look for new customers. While your product or service may not be needed by your typical end users at this time, consider how you can adapt to the changing circumstances to add value and to expand into diverse markets.
6) Evaluate
For businesses, surviving the pandemic means managing communications, keeping good inventory levels and being awake to alternatives. While the repercussions of the Covid-19 outbreak are unprecedented, having a business continuity plan in place helps cushion the blow. Once you are out the other side evaluate your response and what you could have done to mitigate the impact. Flexibility and frequent reviews of your standard processes will enable you to adapt fast to supply-chain disruptions, even on a global scale.
For help with putting in place a Supply Chain Risk Management Strategy contact our consultancy team.