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A Guide for Government and Ghanaian Businesses to Fix the Coronavirus Supply Chain Conundrum
Introduction
The global supply chains have been hit adversely by the Coronavirus pandemic. The supply chain experts, managers and practitioners are in the board rooms strategizing on the best possible means to get their supply chains to function well in spite of the disruptions. There are shortages of materials and products in world manufacturing warehouses and logistical hubs. The International carriers and logistics providers are operating at low a capacity. The SMEs are struggling and a sizeable number of them have collapsed. The world consumers cannot get the products that they would like to buy in the market, which poses serious threats on our survival and existence in this world.
As a nation, are we going to sit down for the Coronavirus to seriously threaten Ghanaian businesses and our very survival before actions are taken? Or are we going to do something about the situation? We need to act now. The Pathways to Reducing the Coronavirus Impact on Ghana’s Supply Chains is a crucial intervention that provides guidelines and strategies for the Ghanaian Government and businesses to fix the supply chain conundrum in the wake of this pandemic.
Establish the Coronavirus Supply Chain and Trade Disruption Team
In view of the Coronavirus impact on Ghanaian businesses, especially small and medium-sized enterprises (SMEs), it is very important for the Government of Ghana to urgently constitute the Coronavirus Supply Chain and Trade Disruption Team to assist in addressing specific supply chain issues and challenges affecting businesses. The global business leaders have predicted that the impact of the Coronavirus on Global Supply Chains will be felt in the next ninety (90) days from March, and it is imperative for Ghana to institute measures to mitigate its economic consequences on the nation. As a country, we should not wait till we start feeling the pinch before we take action? We need to act now to save Ghanaian businesses from collapsing.
The Team should compose of the following:
The main mandate of the proposed Team is to contribute in addressing the Coronavirus Supply Chain and Trade Disruptions facing Ghanaian businesses in order to ensure their business continuity, growth and profitability.
Strengthen and Cushion Businesses from the Coronavirus Impact
Ghana needs a strong private sector in order to generate jobs, increase tax revenues, reduce poverty and deliver economic growth. A vibrant and competitive private sector serves as a sustainable means of financing the government’s social and economic obligations and activities. According to World Bank, Ghana’s private sector in 2019 grew stronger largely by a well-capitalized banking sector. We need to put good measures in place to strengthen the competitiveness of Ghana’s private sector in order to make our economy strong and vibrant.
In this regard, it is important for the Government of Ghana to strengthen and cushion businesses from the Coronavirus fallout. We need to applaud the Government of Ghana for coming out with a stimulus package and fund to mitigate the negative socio-economic impact of the Coronavirus pandemic on businesses, especially SMEs. SMEs contribute about 70% to Ghana’s Gross Domestic Products (GDP) and account for over 90% of businesses in Ghana. The global supply chain disruptions demand support from all fronts to keep SMEs business activities running. The support for the private sector should be in the form of grants, discounted loans, tax credits, deferral of tax payments, trade finance, private sector lending, insurance coverage, etc. We should also support the private sector in responding to the crisis and minimizing its impact on SMEs to sustain economic development.
Indisputably, the Coronavirus will have a serious impact on our financial sector. It will cripple many financial institutions in their quest to release money to the private sector. The initiative by the Bank of Ghana to reduce the Policy Rate from 16% to 14.5% is quite commendable, and the President’s call for commercial banks to reduce interest rate by 2% is gratifying and a good step. The Government through the Bank of Ghana should work closely with the commercial banks in Ghana to consider the feasibility of granting businesses 90-180 days deferral on due loans for affected businesses, especially the SMEs. The Republic Bank has taken the lead. This will help businesses in Ghana to improve their cash flows.
The large and multinational companies in Ghana have a role to play in the precarious situation we find ourselves in. They need to support their SMEs suppliers in order to keep their businesses afloat. They can support them in terms of capitalization, loan guarantees and technical assistance. With respect to the procurement of essential products such as, face masks, gloves, sanitizers, ventilators and other medical supplies, the Government of Ghana should provide some concession to the private sector to ensure the availability of essential items to meet the needs of the Ghanaian citizenry.
Encourage Local Sourcing and Supplier Development
Due to the impact of the Coronavirus outbreak across the globe, it is imperative for businesses in Ghana to start sourcing from the local market in order to meet the needs of their customers.
We need to create a national catalogue of locally produced products and services and make them available to businesses across Ghana as a matter of urgency to mitigate the global supply chain crisis caused by the Coronavirus. This will help businesses to know where they can easily source their products. Variables such as costs, convenience, proximity, flexibility, delivery reliability need to be evaluated properly before a decision is made on where to source the products locally.
It is not out of place to encourage local businesses to start sourcing from the local market because apart from using it as a strategy to deal with the Coronavirus supply chain crisis, it comes with lots of benefits such as: greater control of supplies from suppliers due to proximity and face-face-interactions, reduced supply chain costs, increased in revenue, shorter supply chains, greater predictability of delivery times, reduced tax and tariff burdens and community development.
We cannot talk about local sourcing without looking at another dimension of it which is Supplier Development. It is a strategy of working with key local suppliers with the prime objective of strengthening their capacities technically, financially and managerially in order to increase their performance for the benefit of the buying organization. It is worthy of note that not all suppliers we will identify locally to fill the huge demands caused by the Coronavirus outbreak, have the capacity and wherewithal to deliver the exact specification be it quality, quantity and on-time delivery among others. Once any weakness is identified in a particular supplier, we need to marshal resources and build them up so that they can be in a better position to fulfill huge demands as a result of the Coronavirus outbreak.
Businesses to Embark on Coronavirus Supply Chain Risk Assessment
The attack of the Coronavirus on businesses in Ghana should be of grave concern to the nation, and businesses that have risk management programme in place can survive. The Coronavirus risk is more evident in the supply chain than any business unit, especially businesses in the manufacturing sector. The risk is delaying and disrupting the supply chains, threatening on-time delivery, production processes and customer orders fulfillment. Nevertheless, organizations in Ghana can minimize the impact of the Coronavirus on their businesses if they can quickly prepare the Coronavirus Supply Chain Risk Assessment. The affected organizations need to constitute a Risk Management Committee if not already in place to prepare the Coronavirus risk assessment report on their supply chains.
The Risk Assessment will help organizations to measure the extent of the Coronavirus impact on their business activities, whether it is insignificant, minor, moderate, critical or catastrophic. As a nation, we need to quickly create the Coronavirus Supply Chain Information Centre at Ministry of Information, Trade and Industry Ministry or any suitable and easily accessible location so that organizations, especially the SMEs can send their Risk Assessment Report for necessary assistance to be provided. More importantly, the Risk Assessment Data will help the nation to know specific things to be done to help these ailing businesses to bounce back for the development and growth of our dear nation.
The Risk Management Committee apart from preparing the Supply Chain Risk Assessment Report on the Coronavirus must also assess the whole organization risk profile and appetite and review them from time to time. They need to also prescribe appropriate risk mitigation measures to mitigate the organization’s risks including the Coronavirus. This will help the organization to exercise greater control in the management of risk. In specific terms, what the affected organizations need to do on their own to mitigate the Coronavirus impact on their businesses is to have their supply chains mapped immediately by identifying suppliers and service providers known to be located in high-risk areas in order to understand the extent of the potential problem as they manage their supply chains on a day-to-day basis.
Apply the Concept of Supplier Diversity
One of the strategies Ghanaian businesses ought to use to mitigate or reduce the impact of the Coronavirus on their supply chains is Supply Diversity. It has become an important management practice for top companies around the world including SMEs. It is a strategy for businesses to broaden their supplier base so as to increase their choices of where they can source their products and services. Ghanaian businesses that have been devastated by the Coronavirus outbreak should begin to use this strategy because it can provide them with an alternative and cost effective source of supply. The strategy guarantees your business continuity by making sure that your organization has a diverse supplier base, no matter what problem may occur.
Various studies conducted by the Global Supply Chain experts have proven that organizations that have diversified their supply chains are affected less in times of crises. It gives them a competitive advantage over organizations relying on a single supplier. One key thing businesses in Ghana should be aware of if they decide to apply the concept of Supplier Diversity is that it takes time to set it up. It can take businesses one to six weeks to find reliable suppliers in different countries where the business risk factor is low. They have to agree on price, standards, quantity, delivery flexibility, payment terms, which usually takes time.
Supplier diversity, apart from helping organizations to mitigate their supply chain risks, comes with the following benefits:
Review Inventory Management System
The Coronavirus outbreak undoubtedly has caused many organizations in Ghana to run out of stock. Without stocks, it will be extremely difficult for organizations to fulfill their customers’ orders. Running out of stock can be detrimental to many organizations because it can cause them to lose sales revenue, and if measures are not instituted, it will eventually lead to the collapse of many businesses.
Businesses that have been affected by the Coronavirus outbreak will have to do a quick review of their inventory management system to determine their stock levels and the number of days it will take for them to run out of stock. They will have to assess whether the inventory control policy and strategies currently in use can be relied upon in managing the supply chain disruptions caused by the Coronavirus outbreak.
This is the time for businesses to take a look at their safety or buffer stocks to find out whether they are enough to sustain their businesses in the short run. Safety or buffer stocks are the additional inventory kept to meet future uncertainties. This inventory is maintained so that businesses have sufficient stocks on hand to meet production demand. The critical issue we need to address is whether businesses in Ghana have enough stocks as well as safety or buffer stocks to sustain their businesses in times of crisis? Frankly, businesses that do not keep safety or buffer stocks will feel the pinch of the coronavirus outbreak.
Re-Evaluation of Logistics and Multi-Modal Routes for Shipments
The Globalization of the world has led to increasing distances between customers, suppliers and producers. This development results in the increasing of volumes of global transportation during the last decade. The outbreak of the Coronavirus has really affected the global transportation business badly in terms of the trade volumes transport and logistics service providers ought to handle. World trade volumes have reduced significantly and its rippling effects on businesses across the globe, especially the SMEs are very devastating. Most SMEs do not have systems to deal with the effects of the Coronavirus outbreak on their businesses.
The freight transportation services of multi-modal transportation involve various transportation modes, such as road, rail, maritime, air and pipeline. With the outbreak of the Coronavirus, the number of transportation alternatives can be increased by using different transportation modes and by combining them in multi-modal transportation chains to get shipment to customers at the right time.
What organizations in Ghana ought to do to reduce the impact of the Coronavirus on their supply chains is to quickly do a re-evaluation of logistics and multi-modal routes for their shipments. They need to find out which routes are safe to get their shipments to Ghana, and whether to use the sea, air or road transport. The decision on which mode of transport to use will largely depend on the freight cost, nature of the item and its location. The situation that organizations in Ghana find themselves in is so critical that they have no any better option in getting their shipments quickly to Ghana than the use of multi-modal transport system.
By relying on two or more modes of transportation, it can substantially improve transport efficiency and reduce transportation costs for the entire transportation and logistics chain. According to research by global transportation experts, multimodal transport can improve transportation efficiency by 30%, reduce cargo damage by 10%, reduce transportation costs by 20%, and reduce highway congestion by more than 50%.
Apply Agile Supply Chain Strategy
In supply chain, speed and responsiveness are vital in ensuring that the right product gets to customers at the right time. The Coronavirus outbreak requires dealing with suppliers that have what it takes to apply agile supply chain strategy. It is a strategy of being responsive and getting the product to customers quickly in times of change in market demand or uncertainty. Agile supply chain is the ability to respond quickly to unplanned and unexpected changes and events in the business environment whilst maintaining the customer service level and cost structure.
The key drivers of agile supply chain are speed, cost and efficiency. The strategy is a necessity for success for many businesses across the globe. It is the solution to the many problems that exist in today’s supply chain management networks. This strategy has become the priority, mostly preferred strategy in present era of business volatility and uncertainties. The key benefit of Agile Supply Chain Strategy is that it is focused on avoiding potential shortages which will be good for Ghanaian businesses that have been severely impacted by the Coronavirus outbreak.
The situation that Ghanaian businesses find themselves in during this critical moment of Coronavirus pandemic, requires that they quickly look into the global markets in search of suppliers that are very responsive, market sensitive and can quickly adapt to changing situations. Ghanaian businesses will need suppliers that can prove high-level maneuverability and flexibility in delivery and volume in this critical moment. Frankly, businesses in Ghana will find it tough to identify agile suppliers due to closure of some manufacturing plants in the world as a result of the Coronavirus pandemic. But that notwithstanding, some companies are still producing and we must identify them as a matter of urgency. There is no time to waste. We must act now to avoid the collapse of Ghanaian businesses.
Build Resilient Supply Chains
In today’s turbulent world, numerous events occur in each day which threaten and disrupt the activities of many organizations. An example is the Coronavirus. Organizations that have built resilient supply chains can survive in this turbulent period. Resilience is at the heart of current supply chain management thinking. Understanding this concept and where to invest in resilience, can lead to supply chains that quickly respond to and recover from costly disruptions (Griffis etal., 2015).
The question Ghanaian businesses may ask is, “What is Resilient Supply Chain?” Resilient Supply Chain is the ability of supply chains to recover, bounce back or return to normal during or after disturbances and disruptions. Can Ghanaian businesses that have been affected by the Coronavirus recover or bounce back to normal business activities? As a matter of fact, it will depend on the risk management system and mitigation measures they had in place before the outbreak of the Coronavirus.
For those organizations, especially the SMEs that failed to do forward thinking in terms of instituting measures to deal with an event such as Coronavirus, it is still not too late. They need to assess their current supply chain systems and put some resilient measures to deal with the impact of the Coronavirus. They must have the capacity for resistance and capacity for recovery. The capacity for resistance is the ability of the system to minimize the impact of the Coronavirus whereas capacity for recovery is the ability of the system to return to functionality once a disruption has occurred. In both scenarios, it will be difficult for some Ghanaian businesses to resist and recover from this current supply chain disruption due to financial damage they have suffered as a result of the Coronavirus outbreak. The human resources of Ghanaian businesses are at the forefront of this because they can generate innovative means to combat the challenges and enable businesses bounce back.
In building resilient supply chains, Ghanaian businesses should consider holding extra inventory, having a diversified supplier base and maintaining low capacity utilization. They must increase supply chain flexibility to withstand the Coronavirus supply chain disruption. Lastly, they need to build a new corporate culture by working around the clock to cope with and recover from the supply chain disruption.
Enhance Supply Chain Communication and Information Sharing
Information is a key supply chain driver because it serves as a catalyst for supply chain actors to work together in creating an integrated and coordinated supply chain. Information provides the foundation for businesses to make decisions and execute transactions. Supply chains consist of many actors like manufacturers, suppliers, distributors, retailers, carriers among others. They all work together in ensuring that customers get the demanded products and services at the right time. To achieve this goal, real-time information will have to be shared among all supply chain actors. Without information, businesses will find it difficult to know the needs of their customers, the amount of inventory they have in stock, where goods can be procured and where and how to ship the goods and the status of shipments.
With the outbreak of the Coronavirus, the supply chain actors will have to intensify their efforts in sharing real-time supply chain information among themselves in order to help in mitigating the Coronavirus disruptions on their supply chains. This is not the time for Ghanaian businesses to keep information or compete among themselves. We need to work as a team to fight against the Coronavirus impact on Ghana’s supply chains. For example, if an organization discovers where a particular product can safely be sourced from, the information will have to be shared. If they get to know shipment routes that are safe to route shipment to Ghana, they need to communicate to other Ghanaian businesses for them to use the same routes for their shipments. This is the time for businesses to throw their selfish sentiments away and demonstrate true altruistic attitude toward saving our nation Ghana from the effects of the Coronavirus outbreak.
For this to work properly, it is advisable to establish the Coronavirus Supply Chain Information Centre at the Ministry of information, Trade and Industry Ministry or any other suitable location, which will be charged with the mandate of receiving supply chain and trade related information to be shared among Ghanaian businesses.
Analyze Supply Chain Beyond Tier 1 Suppliers
As a measure to mitigate the impact of the Coronavirus on Ghana’s supply Chains, businesses in Ghana will have to analyze their supply chains beyond Tier 1 Suppliers. In practice there are three types of Tier suppliers, namely Tier 1, 2 and 3 Suppliers.
Tier 1 suppliers are manufacturers that supply items directly to the OEM Companies. OEM stands for Original Equipment Manufacturer. The OEM is the company whose name and brand is on the final package. For example Dell, HP, BMW, CAT, Sharp, Toyota, Bosch, Samsung, etc.
Tier 2 Suppliers are companies that supply parts or items to Tier 1 suppliers only. They cannot deal with OEM companies. With respect to Tier 3 suppliers, they supply raw materials such as metal, plastic, manganese, etc to Tier 1 and 2 suppliers only and cannot deal with OEM companies.
The reason Ghanaian businesses must analyze their supply chains beyond Tier 1 suppliers is that it will help them minimize their supply chain risks. For example, if a company in Ghana trades in Samsung products from China or Germany, they need to go the extra mile to find out the risk profiles of Tier 1, 2 and 3 suppliers to ascertain their supply chain functionality and reliability. Any loophole in their supply chains caused by the Coronavirus will affect the production and inventory levels of Samsung including its capacity to fulfill customer orders. Another example is, if you considering to buy a product from Tier 1 supplier, you need to analyze what is happening to its Tier 2 and 3 suppliers in order to have a clear picture of their supply chain functionality and reliability before you finally decide to buy from Tier 1 supplier. This information will enable you source for alternative suppliers.
Encourage the Establishment of Group Purchasing Programme
Ghanaian businesses buying similar products that have been affected by the Coronavirus outbreak can also establish a Group Purchasing Programme (GPP) to gain leverage through combined purchasing power. Group Purchasing means pooling of your purchasing needs with those of other buyers in order to achieve a better response from suppliers than you would if you were buying alone. It helps member organizations to reduce their supply chain risks, obtain better price, quality and contract terms.
The question one may ask is that how can Ghanaian businesses establish a Group Purchasing Programme? There are concrete steps they need to strictly follow in order to establish a well-functioning Group Purchasing Programme.
The first step to establish a Group Purchasing Programme is Preparation. The leaders of the Group will have to quickly develop a Business Plan which will provide the roadmap on how the Group Purchasing Programme (GPP) ought to function. The business plan will provide information on management structure of the GPP and how it ought to work to achieve good results for members.
Once the business plan is developed, the leaders of the GPP will have to present the benefits and commitments of the GPP to potential members for them to buy into the concept. They need to also present to potential members the list of potential vendors or suppliers that can offer better package for the members. Also, the leaders of the GPP need to convince the potential members of the reliability and responsiveness of the suppliers to fulfill all orders. How the GPP will be funded is of paramount importance. In common practice, members will have to contribute an administrative fee to join the GPP and it is important to make the fee as low as possible in order for the GPP to be attractive. Ghanaian businesses, especially the SMEs must try to join Group Purchasing Programmes in this critical moment of the Coronavirus outbreak in order to strengthen their purchasing power, reduce their supply chain risks and obtain better value for money.
Apply Force Majeure to Get Relief for Supply Chain Contract Breaches
The supply chain will witness a lot of contract breaches globally as a result of the Coronavirus outbreak, and if not managed well, will result in financial damages for many businesses across the globe. A supply chain contract in most cases is a form of agreement between a buyer and seller for the supply of goods and services. In supply chain, buyers and sellers also enter into shipment contract agreement with carriers and logistics services providers. In both supply chain contracts, when one of the contracting parties fails to hold up to its obligation of the contract or does not comply with the terms of the agreement, a breach of contract results. It is instructive to note that the breach of contract can be partial, material and total breach.
For a court to come out with a decision on supply chain breach of contract the court will evaluate the following:
Taking the Coronavirus outbreak as an example, can businesses in Ghana apply a force majeure clause to get some level of relief? In Judicial Jurisprudence, epidemic diseases and plagues are considered to be part of force majeure clauses, and even if they are not been listed as part of the force majeure clauses, the commercial and arbitration courts can still judge the Coronavirus event as force majeure. In the 2003 (SARS) outbreak, many international courts and arbitration bodies judged the SARS epidemic as force majeure.
With the Coronavirus Pandemic, the Judicial Service of Ghana and Ghana Association of Certified Mediators and Arbitrators will have to be prepared to handle supply chain contract breaches. Many businesses in Ghana, especially SMEs have been severely affected by the Coronavirus outbreak and we need to provide them with some legal protection. The role Ghana Commercial and Arbitration courts will have to play to provide some level of relief to Ghanaian businesses using force majeure cannot be overemphasized.
Don’t Take Advantage of the Coronavirus to Engage in Supply Chain Corruption
As a country we should relentlessly work together to reduce the impact of the Coronavirus on our dear nation. This is not the time for businesses to take advantage of the Coronavirus to engage in all kinds of supply chain corruption. Businesses should not use the Coronavirus for profiteering at the expense of the state. The state authorities, businesses and society at large need to be vigilant to prevent all kinds of supply chain corruption. It is therefore important to highlight on some examples of supply chain corruption likely to occur as a result of the Coronavirus outbreak.
We need to come out with the National Mantra which should read:
“Ghana First in the Fight Against the Coronavirus.”
This will go a long way to contribute in stemming supply chain corruption likely to occur as a result of the Coronavirus outbreak. As at now, the prices of goods have skyrocketed in the market place and the government needs to act now else the masses will be taken advantage of, thus increasing poverty in the nation.
Establish a Three-Day Delay Policy for the Clearance of Express Parcel and Air Cargo Shipments if the Coronavirus is Scientifically Proven to Spread Through Parcels and Goods
A study published in the New England Journal of Medicine found that the coronavirus could be detected up to three hours after aerosolization in the air, up to four hours on copper, up to 24 hours on cardboard and up to two to three days on plastic and stainless steel.
The Centers for Disease Control and Prevention (CDC) said that the virus is spread through respiratory droplets and there is currently no evidence to support the transmission of COVID-19 with imported goods. According to CDC “because of poor survivability of these Coronaviruses on surfaces, there is likely to be a very low risk of it spreading from products or packaging that are shipped over a period of days or weeks at ambient temperatures.”
From the World Health Organization’s (WHO) point of view, “The likelihood of an infected person contaminating commercial goods is low and the risk of catching the virus that causes COVID-19 from a package that have been moved, travelled, and exposed to different conditions and temperature is also low.”
Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, said during a CNN Coronavirus town hall that, “if the disease were to transfer onto something like mail, it would likely be a low concentration.” And Amesh Adalja, a senior scholar at the Johns Hopkins University Center for Health Security, agreed that “the risk is theoretical and minimal.”
There are still ongoing studies by scientists to find out if there is a certainty that the Coronavirus can spread through parcels and goods. We should be on alert as a nation. If it is proven by scientists with strong evidences that the Coronavirus can spread through parcels and goods, the best thing we need to do is to come out with the policy to delay clearance of express parcels and cargo shipments by three days. The policy should not apply to containerized shipment because it usually takes more than three days to get to the port.
Conclusion
The Coronavirus has hit the earth with serious ramifications on nations and society at large. Businesses, especially SMEs are suffering and some have collapsed. Many people have lost their jobs and are in a helpless state. We need to prevail over the Coronavirus by applying some of the supply chain strategies explained above. A great famine hit the world, and Joseph, a wise planner applied a supply chain strategy of keeping buffer stocks to save the lives of people in the world (Gen 41:57). Let us believe in ourselves as Ghanaians and together we shall conquer the Coronavirus.
