Protecting supply chains from further disruption

The pandemic caused huge disruptions to supply chains globally including route congestion and blockages, manufacturing shutdowns, a deficit of skilled labour, a global shortage of key logistics components including shipping containers, shortage of warehouse space, a spike in transportation costs and, post the lockdown, increased demand for goods.

The World Trade Organisation has noted these supply chain challenges are likely to last longer than originally anticipated, possibly into 2023, and that developing economies would be persistently marginalised by weak links in supply chains.

In SA, the Transnet strike further impacted already weakened supply chains. The Minerals Council estimated bulk minerals exporters lost R815m worth of exports a day due to their inability to load iron ore, coal, chrome, ferrochrome and manganese onto ships daily.

The 11-day strike in October meant SA lost the opportunity to move R65.3bn worth of goods, according to the South African Association of Freight Forwarders. The association has warned it could take until 2023 for backlogs to clear and normal functioning to be restored.

Virusha Subban, a partner specialising in customs and trade at Baker McKenzie Johannesburg, reveals that businesses are looking at ways to best protect their supply chains from further disruption.

“Measures to strengthen and heal ailing supply chains include digitising parts of the supply chain, increasing manufacturing capacity in low-cost markets, reducing reliance on singlesource suppliers, implementing new business strategies such as increasing capacity to hold more stock, improving supply chain infrastructure, integrating sustainable practices into supply chain management and carefully monitoring changes in government policy across multiple jurisdictions,” she says.

A Baker McKenzie report titled Supply Chains Reimagined says digitalisation will impact how companies facilitate and manage supplier relationships as well as logistics and shipping processes, across all sectors. The report outlines how automation and the internet of things are now playing an important part in supply chain shock-proofing against future disruption and how companies are increasingly combining datadriven solutions with artificial intelligence to identity potential risks, bottlenecks and underperformance in their supply chains.

It also details how, in the longer term, businesses are expected to begin integrating pre-emptive risk management and geospatial analytics into their supply chains.

“Private companies are expected to invest in their own facilities to build more robust supply chains although this is expected to take time to materialise given the economic climate,” says Subban.

LOCAL COMPONENTS

At the same time many African governments have started to look at ways to improve their manufacturing capacity so that they can produce local components that don’t need to be imported and can be trade on the continent which will simplify supply chains dramatically.

There is no question that exporters face many risks including payment defaults. In SA, the Export Credit Insurance Corporation — wholly owned by the department of trade, industry & competition — has been mandated by government to promote the export of local goods and services by underwriting export credit loans and investments.