How to bring back supply chain disruptions to normal post Covid

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Governments are going to see drastic reduction in Tax collection and revenue from other sources are also bound to dwindle and witness a major slump.
  • Boominathan Panchanathan HPMF Thnk Tank Member and Freelance Procurement Consultant
Supply Chain

This is a million dollar question. It needs the concerted efforts of the Governments – Central and States, Entrepreneurs, Promoters and the Working Class, both in the organized and the unorganized sectors. Sacrifices need to be made and foregoing present luxuries for long-term stimulus and impetus.

Governments are going to see drastic reduction in Tax collection and revenue from other sources are also bound to dwindle and witness a major slump. At the same time, to keep up demand or help demand to pick up, Governments have to infuse  large sums towards investment on one hand and to meet the Social security needs of a larger section of the under privileged on the other. Money has to flow to people’s hands to spend, so that demand kick starts.  In this scenario, where are they going to mobilize the funds? They have to resort to deficit financing by going ahead with borrowings. This will lead to an inflationary effect on the economy in the medium and long runs, which is once again detrimental. The job of the Finance Ministers becomes more complicated in balancing liquidity and inflation.

For the entrepreneurs and promoters who are ready to invest will also have to seek the Debt route from Banks and Financial institutions since the Primary Market’s sentiments for IPOs (Initial Public Offer) and retail investors confidence has already taken a beating. They too will be stuck in the quagmire of debt servicing, meeting the Working Capital requirements and Cash Flow position. Flow of funds will stagnate or get staggered as collection from Debtors will be a long drawn process and the same time, there will be pressure from the Creditors to honour the commitments.

In my opinion the working class, whether in the organized or in the unorganized sector will have to bear the major brunt. Across sectors, Layoffs and retrenchment are bound to happen and certainly, the call will be for work force reduction to trim the wage bill. Salary and wage levels increment are not to be contemplated in the near future, as the disruption will consume almost the entire 1st quarter. Incentives and cash bonuses are surely to be postponed and in the most probability, better to be forgotten.

Considering all the above factors, there is more likelihood of disruption in the supply chain. Nevertheless, believe me, public memory is very short and in a couple of month’s time, the festive season will kick start, our affinity for social values and relationships will devour the tentacles of the pandemic.

Monsoon is round the corner in another 45 days. With more hands available due to the reverse migration of the rural population to their homelands, availability of agricultural labor will be high, which was a cause of concern, leading to higher wages and making agriculture non profitable. The conversion of agricultural lands into non-agrarian purpose will reduce, leading to an increase in the area under agriculture and related activities. Agriculture and its allied functions like livestock rearing, dairy, poultry, sheep rearing, etc will get a boost.

Elections are also due in 5 states in early 2021, will certainly have a cascading effect on the economy.

When it comes to Purchasing Management or Procurement, Post COVID – 19, will there be a cautious buying pattern ?

Purchase Management or Procurement should not be viewed in isolation from an organisation’s point of view. Individual or retail procurement should also be taken into account. In the short term, this is certainly going to take a hit, as everyone will be treading with caution on the spending front and will be on shoestring budgets. As I said earlier, with good monsoon and the festive season ahead, average spending will increase. Therefore, the outlook for the medium run is recovery and for the long run, it would be growth, consolidation and development.

Sectors like Information Technology, Communication, Telecom and allied services will boom, with organizations having experienced such seamless connectivity and activity during this lockdown period will look to ramp up infrastructure and upgrade the resources at their premises and even individuals are going to scale up their bandwidth and gadgets. These sectors are going to witness massive investments and demand for new technology will shoot up.

In the Automobile sector, initially the 2-wheeler segment, particularly electric motorcycles will see an upsurge, since the public sentiment is to stay aloof and avoid mingling in the crowded public transportation system. Similar demand surge for the 4-wheel segment will also witness sooner or at a later stage for the same reason. Very sooner newer methods of public transport would emerge.

Food delivery and food processing industries will also see a boost. Banking and Insurance (Life, Health and non life insurance) will see demand as people now realize the need for savings and loss prevention. Banks will have to go on a lending spree to increase liquidity.

Hospitals, medical and allied products and investments in medical research, equipments and infrastructure will see increased activity. Demand for trained personnel worldwide will increase. Agriculture, Animal Husbandry, Fertilizers, Chemicals, and basic utilities will also grow.

Few sectors like Airlines, Commercial Real Estate, and Foreign in bound travel, Hospitality (Room Occupancy) may witness setbacks in the short run but will gain momentum soon.

If the benefits of the fall in crude prices are passed on to the consumers, there will be some easing on the inflationary effect, putting some more money in the people’s hands to spend and also save a part of it.

A concerted effort is required from all the stakeholders with immediate effect. Governments have to kick start massive infrastructure investment and prioritize healthcare, hygiene and sanitation and providing social security as its core function. Entrepreneurs and promoters should look at the working class with empathy and the working class should not shy away from putting in more hours of work with loyalty and integrity.

The dynamics are going to change and in the changed world, we are all going to prosper.

Yes, we humans are resilient.

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How to bring back supply chain disruptions to normal post Covid
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