Managing supply chain disruptions smoothly

The rand has seldom had it easy against major currencies. If your farming operation depends on international trade, be ready to act on the vulnerability that currency uncertainty creates, as well as the repercussions that this might have on your supply ch

If you own rands and need to buy from countries where the euro, the US dollar and the British pound are the currency of choice, life can be miserable. On a positive note, if you can sell your product onto those same markets, you can profit from the rand’s weakness.

NOT BUSINESS AS USUAL

South African farmers should have become accustomed to the impact of a poorly performing local currency against major ones, as this has always been part of doing business in a global supply network. Yet the cost-price squeeze experienced by farmers as a part of business-as-usual is somehow perceived as exacerbated in these abnormal times as the world deals with the coronavirus disease (COVID-19) pandemic.

A simplistic view would be that agriculture seems to have largely escaped the immediate impact of the virus, because people must eat. Locally, agriculture was one of a very few sectors deemed essential from the start of the lockdown. Local supply chains continued demanding and supplying foodstuffs and those that were harvesting got on with the job.

What cannot be denied is that global supply chains have been affected by the onset of the pandemic, and more specifically the reaction of governments trying to curtail the spread of COVID-19 by imposing varying levels of lockdown. At times, there also seems to have been a level of dissonance between various role players, for example where the seller can supply but the logistics fail. The question then arises: are our current supply chain models effective and resilient enough to withstand a global disruption such as COVID-19?

WEAKNESSES IN THE SUPPLY CHAIN

Jim Kilpatrick, global supply chain and network operations leader for Deloitte, suggests that we should be looking for an entirely new supply chain model.

“A decades-long focus on supply chain optimisation to minimise costs, reduce inventories, and drive up asset utilisation has removed buffers and flexibility to absorb disruptions, and COVID-19 illustrates that many companies are not fully aware of the vulnerability of their supply chain relationships to global shocks,” he writes.

How should farmers deal with this situation? For exporters, there are definite challenges with markets and logistics. Local producers who do not export and are simply dependent on imported inputs are also affected.

The key to successful supply chain management lies in understanding all the participants and being connected end to end. This will enhance collaboration, visibility and agility to change tack if the situation changes. The technology we have at our disposal makes it possible to manage a supply chain in this way. Essentially, the days of working in a linear way should no longer be part of your business plan. If you do not have the full picture, you could very easily be surprised, and not in a pleasant way, either.

ARE OUR SUPPLY CHAINS RESILIENT ENOUGH TO WITHSTAND ANOTHER GLOBAL DISRUPTION?

Farming businesses need to develop a holistic view of the entire value chain, from input to end-consumer, and also engage in supplier risk management. This means that as the manager of the business, you need to understand what is happening in the world of your supplier, both to prevent being surprised when disruptions happen and to be ready to nip problems in the bud.

It is also important to understand what alternative supplier sources are available to you, and engage with them.

As we journey on this new way of doing business during, and eventually after, the lockdown, we need to appreciate that as humans we are extremely adaptable and resilient. Currencies may jump around and managing businesses may have changed, but our own ability to adapt and succeed will be the key to success.

Failure to change our ways, however, will make us part of the pandemic statistics.