Global supply chains for government and enterprises have suffered a real shock as a result of COVID-19. This has demonstrated the fragility of supply chains and the degree to which most nations have become dependent upon global supply for many of their needs. The crisis has also exposed weaknesses in the “Just in Time” manufacturing concept, which has left limited stock available to respond to the crisis. Nowhere has this been more visible than in the provision of Personal Protective Equipment (PPE).
As we recover to the post-pandemic new reality, governments and enterprises are addressing how to rebuild and diversify their supply chains in the short, medium and long term. It is vital for governments to establish visibility over all key supply chains. This can best be achieved through technology. A predictive supply chain toolset can not only provide visibility of supply chains, but also identify where future shortfalls are likely to occur, enabling other plans to be put in place. Such a tool can also provide a sandbox in which to test scenarios that will be vital to addressing future crises and enabling quicker responses.
In the short term, existing supply chains are likely to be used to replenish stocks and re-establish the flow of goods. In the mid-term however, organizations are likely to diversify at least some of their procurement across suppliers and locations. It is the longer term, however, where governments have the most important part to play. There is already talk of re-shoring capabilities lost from nations through globalization, but for this to become reality governments must develop focused strategies. Attention should be directed to specific supply chains, particularly those supporting disaster recovery and critical national infrastructure. It may be necessary to legislate for industrial strategies in key areas, such as PPE, defense, national security, shipbuilding, crypto and micro-electronics.
The European Union has already made a move in this area and has issued guidelines on an EU-wide approach to foreign investment screening for critical assets.1 Targeting investments “likely to affect the security and public order of the Union and its Member States,” the guidelines are particularly focused on health, medical research, biotechnology and infrastructure that are essential for security and public order, without undermining the EU's general openness to foreign investment. It allows for consultation among Member States and the European Commission, to identify and consider any concerns about particular investments before allowing them.
To address supply chain challenges, the Indian government has formed an empowered group of officers to troubleshoot emerging issues, caused by lockdown-related supply chain blockages. It includes the customs, food, consumer and transport ministries, and coordinates operations with public and private sector stakeholders to address bottlenecks. The group established a nerve center with dashboards leveraging data systems across government agencies to assess movement of trucks containing food and pharmaceuticals, rakes and port traffic. The dashboard also provided decision makers visibility on the arrival of food items at major wholesale markets. It has supported government decision-making throughout the pandemic, leading to a significant increase in critical goods delivered by all forms of transport over the month of April.2, 3
Governments also need to adapt their procurement strategy to the speed of innovation. Just as Industrial Age governance had to be swept aside to enable swift digitization, the received wisdom around procurement needs to be brushed down. For example, government departments tend to contract for atomized requirements in IT; documenting all user and system requirements in great tomes aiming to protect the public purse. Sadly, this frequently does not occur with the ever-accelerating curve of innovation, whereby many of these requirements no longer make sense by the time they are due for delivery. Instead, governments should consider contracting for outcomes, stipulating the intended outcomes but allowing the product to morph, within boundaries, as development and innovation occurs.
Supply chain dislocation has been one of the most visible of the impacts of the COVID-19 crisis. Governments around the world need to play a prominent role in developing strategies to protect supply chains for the future and put in place more robust disaster recovery plans, including relevant stockpiles, to enable more resilient outcomes.
1 The European Commission. (2020, March 25). Coronavirus: Commission issues guidelines to protect critical European assets and technology in current crisis. Retrieved from: https://ec.europa.eu/commission/presscorner/detail/en/IP_20_528
2 The Indian Express. (2020, May 7). With strong partnerships across the country, there has been steady improvement in supply chains of essential goods. Retrieved from: https://indianexpress.com/article/opinion/columns/coronavirus-lockdown-effect-migrant-labour-essential-goods-stocks-supply-6397380/
3 Rediff.com. (2020, May 26). Meet the man who ensured food supply during lockdown. Retrieved from: https://www.rediff.com/news/interview/meet-the-man-who-ensured-food-supply-during-lockdown/20200521.htm
Throughout this website, “we”, “KPMG”, “us” and “our” refer to the network of independent member firms operating under the KPMG name and affiliated with KPMG International or to one or more of these firms or to KPMG International.