Archive: March, 2020

Coronavirus

There’s only one thing to talk about this month because there is only one thing in the news: coronavirus. Aside from supermarkets running out of toilet roll, kids appearing in work video conference calls and an increase in alcohol consumption at home, what is the impact of coronavirus and how should procurement professionals get ready to deal with the medium term effects?

“The coronavirus is the most significant adverse shock the world has experienced in post-war history, with unprecedented health, social, and economic impacts. Under various scenarios, the global economy is projected to go into a deep recession, worse than the 2008 Global Financial Crisis” said Mari Pangestu, Managing Director for Development Policy and Partnerships from The World Bank at the Virtual Meeting of G20 Trade Ministers yesterday.

  • The coronavirus has exposed further weaknesses in global supply chains. The trade war between US and China led to an increase in the purchase price of many products including clothing and electronic goods. Brexit caused the value of sterling fall by a fifth which has affected all goods and service imported into UK. Restrictions in the movement of people designed to slow the spread of the virus means that any goods that are shipped are at risk. The further and more complicated the logistics the greater the risk. Buyers should look to source goods and services locally. This may mean paying a higher price (even taking into account the value of sterling) but will achieve greater resilience for the future.
  • Travel, hospitality, house building and the oil industry have been hardest hit so far. Despite government efforts to keep people in work, we are already seeing high levels of lay-off as businesses in these sectors struggle to survive. A shortage in capacity in those industries hardest hit will lead to higher prices when the crises passes. Buyers should reach out to critical suppliers and ask for preferential terms for preferential treatment after the crisis has passed. They should also look for alternative suppliers as contingency.
  • While some sectors are struggling, a handful are experiencing a boom, notably personal protective equipment (PPE) manufacturers and distributors, drug companies working on the vaccine for covid-19 and ventilator makers
  • When the crisis is over, questions are going to be asked whether the public sector procurement rule (OJEU) are fit for purpose. Dyson, a maker of household appliances like vacuum cleaners can develop a ventilator in a matter of days and that other companies can develop a basic ventilator called a continuous positive airway pressure (CPAP) machines in a similar timeframe for a fraction of the price, is going to led critics to ask if the public sector is getting value for money.
  • Restriction to combat the spread of coronavirus have forced people to who still have jobs to work from home. Many of these habits are likely to linger long after the virus has passed as managers realise that it’s easier to attract and retain talent by offering more flexible working.

The situation is changing every day. It is not clear even whether the current period of lockdown is going to last 12 weeks, 6 months, 12 months. What is clear, however, is that coronavirus is a killer and that the lives of those people who survive is going to be changed forever.