Covid Truths or Myths: The longer the chain, the weaker its links?

Posted on March 30, 2020

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Every Monday morning, I invite you to share your opinion regarding some of the more interesting and thought-provoking stories from the past week on how the COVID-19 pandemic is impacting procurement and global supply chains.

The purpose of this exercise isn’t to merely shoot the breeze. The whole idea is to stimulate meaningful discussion about the changes that are certain to happen because of COVID-19.

Everything from the emergence of the remote procurement professional and governments controlling supply chains to the growing belief in protectionism will be covered.

When it comes to the future of procurement and supply chains, nothing is off the table at this point, so feel free to let loose!

Government Intervention

In a Globe and Mail article, last week the provincial government of British Columbia “gave itself the authority” to assume control of both public and private supply chains should the COVID-19 crisis warrant such intervention.

Based on an impromptu social media poll, the general consensus of procurement professionals is that the move is not necessarily a bad thing if the government assumes a partnership role. There is, in fact, a belief that such intervention may be beneficial in that could ensure a speedy bypass of specific regulations that would otherwise hinder rather than help supply chains meet pressing demands such as the growing need for ventilators.

The only cautionary note involved the introduction of a “war measures act” in which governments would have the power to dictate what manufacturers build and by when. Governments having such “power” was disconcerting to many procurement professionals.

So, here is the question; now that President Trump has invoked the Korean War-era Defence Production Act, to force GM to build ventilators in one of its plants in Indiana, what are your thoughts regarding government intervention with our supply chains?

Protectionism

Another hot topic that is continuing into this new week is the growing sentiment that protectionism is the way to go when it comes to our supply chains. In other words, and besides putting all our eggs in the China basket, are we generally stretching our supply chains to the point of breaking due to globalization and strategies such as low-cost country sourcing?

Unlike years past, such as when I interviewed then Canadian Trade Minister Stockwell Day regarding the Buy American policy that threatened Canadian access to the U.S. markets, similar sentiments were more political than practical. At least that was the Minister’s belief when he said that; “popular American opinion surrounding protectionism was the basis for Congressional support of the conditions associated with the stimulus bill, versus the existence of legitimate economic imperatives.”¬†

However, with the COVID-19 pandemic, it isn’t a political or populist issue as many European countries are starting to rethink globalization as they struggle to provide their citizens with desperately needed goods.

Ironically, and as stated in the previous story, the fact that the President had to impose the Defence Protection Act to get GM on track regarding the manufacture of ventilators may mean that protectionism and repatriating supply chains may not be a “catch-all” solution.

Remote Procurement

Back on the 17th, I wrote an article asking if procurement professionals could work as efficiently from home as they do at the office.

It is clear that remote working is now and at least for the foreseeable future a reality for everyone. However, and looking beyond the question of personal productivity, what happens if the majority of companies decide that home-work is better? What if the majority of employees end up staying at home after the crisis has passed and continued working remotely?

What impact would this have on things such as office space requirements, car sales, gas prices? Think about this for a moment; if we work from home, do companies need the office space they currently occupy? If we are not commuting as much, we will not likely be filling up at the pump as much as were before.

In short, I guess what I am asking is how the emergence of a significant remote workforce will change the overall economy?

Final Thoughts

Various media are reporting that one of the consequences of the COVID-19 pandemic is that that some businesses may not survive the shutdown resulting from social distancing and the quarantine.

There are suggestions that this is not a bad thing. For example, calling it “creative destruction” pundits indicate that zombie businesses and sunset industries will be put out of their lingering demise mercifully thus paving the way for the next generation of enterprises. While this may be true, how many of these businesses will no longer exist and are procurement people able to determine the impact – at least in the short run, on their existing supply chain?

Something to think about.

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Posted in: Commentary