JARAMOGI OGINGA ODINGA UNIVERSITY OF SCIENCE AND TECHNOLOGY

NAME: ANNET AKOTH ONYANGO

REG NO: B131/2017/2016S

SCHOOL: BUSINESS AND ECONOMICS

(PROCUREMENT OPTION)

COURSE CODE: ABA 446

COURSE TITLE: SUSTAINABLE SUPPLY CHAIN MANAGEMENT

TASK: ASSIGNMENT 2

LECTURER: DR PETER R.AGWANDA

QUESTION

As a procurement student, you have been asked to do a presentation on the impact

of covid-19, particularly on how it is affecting the supply chain. Discuss
Global pandemics have been present and plagued humanity since the early days. Each
pandemic caused both an economical and societal effect. A pandemic is defined by the World
Health Organization (WHO) as a worldwide spread of a new disease .The current COVID-19
pandemic is applying pressure on global manufacturer production capacities and global
supply chains. Since the start of the outbreak, UNICEF Supply Division has been undertaking
a continuous assessment of developments and the impact this crisis has on shipping and
logistics as well as on sourcing of essential and strategic supplies.

The supply chain is defined as a network of organizations that are involved, through upstream
and downstream linkages, in the different processes and activities that produce value in the
form of products and services in the hands of the ultimate customer.

Supply chain disruptions and the lockdowns are already affecting logistics companies.
Operational constraints are expected to lead to delivery delays, congestion, and higher freight
rates. However, not all segments will be impacted equally—companies that serve e-
commerce are seeing increased activity as consumers opt for online shopping of essentials,
while those that serve other sectors (such as auto and consumer goods) will see a downturn.
One mitigate: record-low fuel prices should provide some relief to transport operators.
Overall, the uncertainty will exert downward pressure on revenues.
● the impact is severe for small players: Small trucking businesses are being severely hit
because they tend not to have any backup, recovery plan, or intermittent operation plan. Lack
of technology, as well as tools to follow health guidelines (for example, disinfecting
deliveries), further complicate their response.
● Top players are experiencing a strong impact: In : In April, both DHL and CEVA Logistics
declared Force Majeure—a clause that allows contracts to be declared null and void due to
acts of God or other unexpected circumstances—on all their contracts due to COVID-19.
Other companies’ credit metrics are likely to deteriorate, triggering downgrades, as has
already been seen in the sector.

Furthermore, the disease has stopped movement hence, less productivity as people are not
performing in their respective companies and industries in terms of material flow and
information flow. Some of the effects of covid-19 on the supply chain are:

 Pharmaceutical inelasticity AND Managing the Supply Chain to Meet Health & Safety
Needs
While multiple commercial airlines are temporarily repurposing their civilian aircraft to
deliver personal protective equipment (PPE) to the most severely affected countries, the
short, medium and long-term dynamics of pharmaceutical supply chains are more complex
than those recently established to deliver medical supplies.
Arguably the most critical supply chain during the crisis serves the healthcare industry,
ensuring sufficient supplies of medical devices like ventilators, sanitizers/cleaners, and
personal protection equipment (PPE), including masks, gloves, and gowns.

Export controls have been imposed in many markets, and in the case of medical equipment
and PPE, governments are re-routing deliveries. Officials have seized products at the border
to keep them in the country and in some cases sent PPE to hospitals instead of the original
buyer. As the coronavirus first spread, the initial challenges were related to reduce supplies
from China.

Now supply chains are challenged everywhere, and with unemployment rising and consumer
spending reduced, demand is plummeting. Outside of companies making essential
medical/PPE goods or products for the defence industry, few large manufacturers can keep
operating at full capacity. Automakers and their suppliers have in most cases closed
manufacturing facilities. However, some companies are adapting and have shifted to produce
different goods in order to meet the surge in demand for medical-related products for
example a producer of textiles/gas are just but a few that its equipment has moved to making
medical visors.

Social & Economic Hardships

As the coronavirus has spread around the world over the past four months, the pandemic has
brought unimaginable devastation with the loss of over one hundred thousand lives and
millions of confirmed cases of the disease. Globally we are self-isolating and staying away
from meeting places and events to avoid contracting or spreading the disease. In addition,
widespread policies mandating social distancing are in effect, and most states have shut down
non-essential businesses like sit-down restaurants, gyms, and boutiques as well as schools,
parks, and other public places.

The COVID-19 outbreak has upended our day-to-day life and significantly impacted the
global economy. Statistically, an analysis by economics around nations estimates the daily
economic output has fallen by a small margin compared with the first week of March prior to
extensive closures. Industries like travel and hospitality face a devastating impact from the
virus.

With large portions of the workforce laid off or working fewer hours, a lot of people around
the world including Kenya filed unemployment claims during the weeks between April and
June, according to the Labour Department. At the other end of the spectrum, some industries
are scrambling to find workers to meet increased demand. Unfortunately, there are
indications that illnesses and fears associated with the virus are leading to workforce
shortages and strains on supply chains. The roles most impacted at this point in the crisis are
truck drivers, grocery store staff, and workers in meat processing plants, and shortages of
these workers may lead to delays or shortfalls in certain products in the country.

Adapting to Huge Changes (Food value chain complexities)

A striking aspect of the COVID-19 crisis is the degree to which some industries have been
entirely shut down while others are surging. Indeed, even similar products within related
sectors of the economy have been impacted in very different ways. The clearest example of
this may be in food manufacturing and processing. COVID-19 can lead to higher food prices
both as a cause and because of food shortages. Restrictions on supply chain logistics will
increase transaction costs and therefore consumer prices. A speculative drive can occur and
cause price increases. Higher food prices, in turn, may indicate an impending shortage. Now
food businesses needs to formulate new requirements for its suppliers, as well as evaluate the
entire supply chain up to the supplier of raw materials, and not just the assessment of their
counterparty. Epidemic outbreaks are one specific case of Supply Chain risks. Long-term
disruption and unpredictable scaling characterize this type of SC risk, while the spread of
risks and the spread of an epidemic and simultaneous risks in the sphere of demand, supply
and logistics infrastructure.
Firstly, a sharp decline in demand in foreign markets, especially during the harvest season,
led to an increase in product volume, which, in turn, increased the demand for storage.
Growers, who are mostly accustomed to being picked up by an exporter, will have to store
their products in refrigerators until they are in demand, which means that now there are
additional costs for transportation and storage.
The provision of special clothing, and so on. This has led to increased storage costs in the
refrigerator. In cases where processors might be able to modify production and acquire the
packaging to sell in the grocery channel, they often lack relationships with stores to negotiate
for shelf space.

For some consumer packaged goods companies, the surge in demand has meant sharpening
their focus to produce key Stock Keeping Units at the needed volume. One example is Coca-
Cola which is seeing a spike in demand in grocery and ecommerce as consumers stock up,
and the brand is aiming to deliver its best-selling beverages while smaller Stock Keeping
Units may go unstacked for now.

The Impact of COVID-19 on Transporting Goods

Even when manufacturers are able to get the needed product in the right packaging and
secure space on the shelf, transporting goods represents another major challenge.

Carriers in general do not have extra capacity to meet the spike in demand brought about by
the crisis, and the delivery of goods has slowed in many cases due to several factors. First, a
chronic shortage of freight truck drivers has existed for several years as the aging workforce
of drivers retire without sufficient numbers of new workers joining the industry to replace
them. As the coronavirus spreads, there are even fewer as some drivers are not working due
to illness. Meanwhile, others fear contracting a virus that is particularly dangerous to those
over 60 and have opted to not take the risk of working in a job where they interact with many
others along their routes.

In addition to the shortage of drivers, logistical limitations are preventing the efficient
distribution of products to meet surging demand. Delays and backlogs at plants may result
from overloaded delivery docks and storage areas that lack the space to handle the increased
output. A shortage of refrigerated trucks has slowed shipment of products like meats and
grains as well.

Limitations to airfreight is at present the single biggest challenge to UNICEF logistics

operations with restrictions and reduced demand on passenger flights, which generally carry
cargo in the belly-hold. Despite the current increase in freighter flights, reduction in
passenger flights is causing a decrease in global air cargo capacity. This has had a knock-on
effect on airfreight rates which have increased substantially and has also negatively impacted
delivery of supplies worldwide, most notably to those African destinations which lie outside
major trade routes. Sea freight is less affected with rates remaining constant although a fall in
demand has led to a reduction in frequency of sailings.
● Air freight: Volumes fell in March 2020 due to a sharp reduction in passenger flights
(which carry freight as belly cargo) and the drop in manufacturing in countries. However, as
shippers and governments turn to air cargo for essential goods, air freight rates have
increased—some carriers are seeing delays with increased congestion at airports. As time
passed by we saw an increase in capacity, as well as a recovery in volumes transported
(although they are still down, year-on-year). The overall reduction in capacity is greater than
the net reduction in demand, which supports higher air freight rates. The economic recession
will be a second demand shock. The full effect of the pandemic on global supply chains is not
yet known. As the IMF is predicting a 3 percent contraction for the global economy in 2020,
the expected recession will deliver a second hit to demand and, thus, logistics companies,
exposure to trade, manufacturing, and demand for goods.
Other effect
Market uncertainties
The COVID-19 outbreak also causes uncertainty and fear, Uncertainty is mainly experienced
in logistics management, one of the respondents stated that the pandemic has come with
increased global demand, which has, in turn, interfered with logistics integration in the SCM.
This challenge is heightened by the closure of international borders as a way of curbing the
increasing spread of COVID-19, because of the lockdown in most countries, there are no
more supplies of those materials. This interferes with logistics in the supply chain
management as what had been expected before cannot be achieved in the wake of COVID-19

GOING FORWARD
The recovery and long-term impact of the pandemic on supply chain may be affected by
adaptions and factors, as described below:
● Increased dedicated air cargo capacity: The airline industry is already reallocating fleet to
exclusively serve air cargo demand.
● increased cargo inspections and cross border control protocols: Governments have
responded to the crisis with temporary trade embargoes and export restrictions for sensitive
cargo (such as medical supplies, pharmaceuticals). In the longer term, logistics costs may
increase due to tighter cross-border processes and controls fuelled by concerns regarding the
transmission of diseases.
● Technology and e-commerce rise: Logistics has been in the midst of a tech-driven
revolution. Companies with robust digital capabilities that allow them to provide cargo
visibility/traceability and do business online are at an advantage. This would entail
investments in technology, such as the Internet of Things (IoT), cloud computing,
automation, and data analytics. In the long term, robotics, drones, and autonomous vehicles
might reduce logistics services providers’ exposure to labour shortages.
● Reconfiguration of global value chains: The pandemic has exposed the vulnerability of
extended and complex value chains to production disruptions, particularly in the East Asia
Pacific region. As a reaction, many of these supply chains may shorten or diversify through
reliance on alternative partners (for example, nearshoring) or intensified efforts to bring home
(such as reshoring) strategic value chains. The shortening of supply chains may benefit
countries with capable manufacturing sectors and beneficial exports’ policy (for example,
Colombia, India, and Mexico) to partially substitute China over the medium term. There may
also be a trend towards placing additional warehousing capacity or dry ports near demand
centre’s to shorten the time to get goods to market.
● Recovery prospects will vary by country, subsector: As supply chain is a diverse sector,
recovery prospects will vary depending on the length of lockdowns and the duration of the
subsequent economic crisis. Large companies with a diversified business (such as multiple
clients, serving different sectors in various countries/states) will be better placed to weather
the storm.

REFERENCES
https://www.wsj.com/articles/state-coronavirus-shutdowns-have-taken-29-of-u-s-economy-offline-
11586079001
https://www.cnbc.com/2020/03/24/coronavirus-coca-cola-ceo-says-supply-chain-is-creaking.html
https://www.ft.com/content/140c9875-2c57-4e54-a4c4-e8518645887c
https://www.forbes.com/sites/stevebanker/2020/04/13/covid-19-and-3d-printing/#7fb6317a3f7a
https://hbr.org/2020/03/coronavirus-is-a-wake-up-call-for-supply-chain-management
https://insight.kellogg.northwestern.edu/article/coronavirus-upended-supply-chains-how-companies-
can-prepare-disruption
https://cointelegraph.com/news/eu-founded-task-force-to-study-how-blockchain-may-help-covid-19-
response
https://www.weforum.org/agenda/2020/03/china-covid-19-coronavirus-mobility-solutions/