INSERT TITLE: Impact of COVID-19 on the Global and Domestic supply chain industry

ABSTRACT

This iresearch ipaper iseeks ito icapture ithe iissues, ichallenges iand iimplications iof ithe iCOVID-19

i pandemic ion isupply-chain iactivities iglobally, iregionally iand iin iZambia. iThe ipaper ialso iprovides

i strategies iand iinsights ion imitigating ithe irisks iand iimpact iof ithe isupply-chain idisruptions ibrought ion iby

i the iimpact iof ithe ipandemic. iSupply-chain iresilience iis icritical ito ieconomic irecovery iin iZambia. iAn

i effective isupply ichain isystem iensures ihigher iefficiency irates, iquality iover icontrol, ibetter icustomer

i relationship iand iservice, ifaster iproduction icycle, ireduced iproduction icosts iand ian ioverall iimprovement iin

i the ifinancial iperformance iof ia icompany. iThe ientry iof iCOVID-19 iin iZambia iand ithe isubsequent

i implications iand iimpact ihas iadversely iimpacted ibusinesses, ihouseholds iand ithe ieconomy. iThe islowdown

i of iretail iand itrade iactivities, ias imost ifinished igoods iflow ithrough ithe isector ito ifinal iconsumers, ihas ialso

i affected ithe imanufacturing isector, iespecially ifor inon-essential igoods. iManufacturers iand idistributors ihave

i found iit idifficult ito ireplace ior ireplenish itheir iinventory iand iequipment ior imachinery, idue ito isupply-chain

i disruptions iglobally. iImporters iand iexporters ihave ialso ifound iit ichallenging ito ideliver ior ibring iin igoods

i across imost iinternational iborders, ias ithe iseaports, iwhich iis ithe imain iroute ifor iinternational iexchange iof

i goods, ihave ibeen iimpacted iby irestrictions iand ithe islowdown iof iindustrial iactivities iof imajor itrading

i partners. iThe iMinister iof ifinance iDr iBwalya iN’gandu iin ihis iministerial istatement ito iparliament iin iJune

i 2020 ilamented ithat idue ito iadverse ieffects iof ithe icovid-19 ipandemic, ithe ieconomic igrowth iwas

i downgraded ifrom ithe iinitial igrowth iof iat ileast i3 ipercent ito ia inegative igrowth iof iaround iminus i4.2 ipercent.

i To imitigate ithe iimpact ion ibusiness iactivities ifrom iCOVID-19, ithe iBank iof iZambia ithrough iits

i ZamBanker i2020 iseries iadvised iplayers iin ithe ilogistics, itransport iand isupply ichain iindustries ito ideploy

i innovative imeasures iin iinventory imanagement iand idistribution, iengage iin istrategic ipartnerships iwith

i players iand iintermediaries iacross ithe ivalue-chain.

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 OVERVIEW OF THE PANDEMIC AND HOW IT HAS CAUSED SUPPLY-CHAIN

DISRUPTION

Global supply-chains have always been vulnerable to shocks that occur in the major exporting

countries. Some of these shocks include trade wars, pandemics such as COVID-19, domestic political

instability, etc. This vulnerability is especially because of factors that could impede the seamless flow of

goods and services from these exporting countries to their major import trading partners. COVID-19 has

disrupted global activities across all economic sectors and industries. The disruptions are largely due to

the lockdown measures adopted and implemented by countries globally as a health strategy to mitigate

the impact of the pandemic’s spread on the human population. Production halts, movement restrictions of

people and goods, border closures, logistical constraints, as well as the slowdown of trade and business

activities are fall-outs of the COVID-19 lockdown measures. The COVID-19 pandemic, which began in

Wuhan, China, was first reported to the World Health Organization (WHO) office in China on 31

December, 2019. As of August 17, 2020, there were over 22.1 million reported cases. Its emergence in

China, which is one of the major manufacturing and distribution hubs globally, affected the supply of

finished and semi-finished products to countries around the world that depend on China for trade.

In the last one and half decade, China has emerged as the world’s largest exporter with about US$2.3

trillion worth of goods exported annually (World Economic Forum-WEF, 2020). WEF reports that China

holds 16% of total global exports. Combined, the three largest exporters (China, the United States and

Germany) in the world control nearly 30% of total global exports. China also accounts for nearly 20% of

global intermediate products. This has implications for foreign manufacturers that depend directly or

indirectly on the country for inputs. For instance, between 2018 and 2019, over 65% of India’s total

imported Active Pharmaceutical Ingredients (API) was from China. As a result of the pandemic, India has

been experiencing delays in the supply, production and distribution of its pharmaceutical products (Ernst

and Young, 2020). Globally, the supply of critical items such as personal protective equipment (PPE) and

other medical products and equipment have been constrained due to increasing demand worldwide and

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export irestrictions ifor ithese icommodities iin imany icountries. iWith ithe iimplementation iof ithe ilockdown,

i the itransportation isector, iupon iwhich iglobal isupply-chain iactivities iare idependent, ihas iremained ipartially

i closed. iStatistics ishow ithat ino iless ithan i90 icountries ihad iimposed ilockdowns isince iMarch i2020 iand iat ithe

i peak iin iApril i2020, iabout i3.9 ibillion ipeople iwere iunder ilockdown i(WHO, i2020). iConsequently, ithere

i were iconstraints ito ithe ismooth ifunctioning iof ithe iglobal isupply-chains, iand ithis ihas ihad ian iadverse

i impact ion iglobal ibusiness iand iindustrial iactivities. iThe ishipping iindustry, iwhich iaccounts ifor iabout i90%

i of iglobal itrade iactivities iestimated iat iabout i$12 itrillion, ihas ibeen iimpacted iby ithe ipandemic. iBy

i implication, ithe iWorld iTrade iOrganization-WTO i(2020) iestimated ithat iglobal itrade iwill ifall i13% ito i32%,

i in iterms iof ivolume, iby iyear-end i2020. iThe isupply-chain idisruptions ihave ialso iimpacted iother isectors

i including imanufacturing, iretail, iand iconstruction, iamong iothers. iAccording ito ithe iWTO, inearly iall

i regions iexperienced idouble-digit idecline iin itrade ivolumes iin i2020, iwith ithe imost idips iin iexports icoming

i from iNorth iAmerica iand iAsia. iThe ielectronics iand iautomotive isegments iwere ithe ihardest ihit idue ito ithe

i complexity iof itheir ivalue iand isupply-chains. iCOVID-19 ihas ialso iexposed ithe ivulnerability iof ithe iworld’s

i food isupply-chains. iAccording ito ithe iWorld iFood iProgramme-WFP i(2020), ithe ipandemic iwas iestimated

i to iplunge iabout i265 imillion ipeople i(up ifrom i135 imillion ipeople) iinto iacute ihunger iby ithe iend iof i2020.

i The ifinancial iimplications iof iCOVID-19 ion itrade iand isupply ichains iare isignificant. iAccording ito ithe

i Institute iof iShipping iEconomics iand iLogistics-ISL i(2020), icontainer ithroughput iindex, iwhich imeasures

i the inumber iof ipeople iand igoods ithat ipass-through ishipping iports idaily, ideclined ifrom i113.3 iin iJanuary

i 2020 ito i107.7 iin iMay i2020 i– ia idecline iof i9.5%. iIn iaddition, ithe iInternational iAir iTravel iAssociation-

IATA i(2020) istated ithat iIndustry-wide iair icargo itonne-kilometres i(CTKs) ifell iby i15.3% iyear-on-year iin

i the ithree imonths ito iApril i2020. iExplaining ifurther, icargo ivolumes iplunged ibut ilack iof icapacity iboosted

i loads iand iyields. iThis iimplies ithat isea iand iair icargo itransport ihad ibeen iadversely iaffected iby iCOVID-19.

i The iUnited iNations-UN i(2020) iforecasted iworld itrade ito icontract iby inearly i15% iin i2020 iamid isharply

i reduced iglobal idemand iand idisruptions ito iglobal isupply ichains. iThe iWorld iBank i(2020) iprojected ia

i decline iof i5.2% iin iglobal iGDP iin i2020 idue ito iCOVID-19. iWhat ithis imeans iis ithat ithe iamount iof iglobal

i incomes iand iwealth iavailable ito ifinance iproduction iand iconsumption ireduced iby i5.2%. iIn irelation, ia ifall

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i in iglobal ipurchasing ipower imeans ia ifall iin idemand ifor igoods iand ia ireduction iin ithe iactivities iof isupply

i chain icompanies. iAt ithe imicro ilevel, iCOVID-19 iwill ilead ito ijob ilosses, ireduced iincomes iand idecline iin

i business iactivities. iSubsequently, ihouseholds icould idemand ifewer iproducts, ithereby iaffecting ithe

i performance iof isupply ichain icompanies.

SUPPLY CHAIN AND ETHICS/DIVERSITY

Since the mid-1990s, supply chains have increased in strategic importance within organizations,

principally due to the large amounts of money they are responsible for (Emiliani, 2010). Described as

“the series of companies, including suppliers, customers, and logistics providers that work together to

deliver a value package of goods and services to the end customer” (Maloni and Brown, (2006), p.36], the

supply chain’s conduct can have a significant influence upon the performance of a company. More

simply, a supply chain can involve the chain of organizations from the supplier’s supplier to the

customer’s customer, and various works have focused upon all aspects of this (Ellram and Cooper, 1993;

Novack and Simco, 1991; Jones and Riley, 1985). Additional value can be created for customers and

other stakeholders through effective supply chain practices (Bhatnagar and Teo, 2009). This can help an

organization to differentiate its offer and better serve its customers’ needs especially considering that

customers come from diverse ethnic dispensations. As a result, a company may adopt a unique position

from its competitors that allows a company to either lower its costs or charge a premium for enhanced

services (Hansen and Smith, 2006; Porter and Kramer, 2006). Ethical embeddedness is a particularly

effective method of adding value, particularly as supply managers are more likely to face ethical

dilemmas on a daily basis compared with managers of alternative functions (Eltantawy et al., 2009;

Lindfelt and Tornroos, 2006). With purchasing and logistics having an increasing influence upon the

success of an organization, supply chain ethics has emerged as a key concept that can affect a business’

competitiveness. Ethical responsibility and its impact on supply chain performance has therefore become

a prominent issue within business studies and practice. Beamon (2005) posits a simple definition of

supply ethics as “the practice of providing goods and services to customers while subscribing to an ethical

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code”. This is more elaborately described by Eltantawy et al. (2009, p.101) as the act of “managing the

optimal flow of high quality, value-for-money materials, components or services from a suitable set of

innovative suppliers in a fair, consistent, and reasonable manner that meets or exceeds societal norms,

even though not legally required”. This highlights the necessity to act responsibly in all activities from a

product’s source to the final consumer. As both purchasing and logistics managers’ influence spans a

firm’s internal functions and external stakeholders, they are in a strong position to affect the

organization’s socially responsible activities (Carter and Jennings, 2004). However, it has been noted that

there has been little research dedicated to the subject of ethics within supply chains, with only some

isolated aspects of supply chains being addressed from this perspective (Svensson and Baath, 2008). In

order to expand the knowledge of ethics within supply chains, it is useful to know what drives firms to

adopt an ethical stance, which practices are being adopted, and the results of acting ethically from both an

organization and stakeholder point of view

WHAT THIS MEANS FOR GLOBAL SUPPLY-CHAINS GOING FORWARD: KEY

INSIGHTS

Many icountries iare ilooking iinward iand ireconsidering itheir isupply-chain istrategies, iwhile imultinational

i companies iare irestructuring itheir ioutsourcing istrategies ifor ithe isupply iof iessential iinputs ifor idomestic

i operations ito imitigate ithe irisks iof iexternal idisruptions ifrom ithe ilockdown imeasures. iGovernments iof

i developed ieconomies ihave iincreased itheir icall ito ibusinesses ito icarefully iaddress iprocesses ithat iwill

i ensure iresilience iin ithe iface iof ifuture idisruptions ito iglobal isupply iand iindustry ivalue-chains. iFor iinstance,

i the igovernment iof iFrance ienjoined iEU igovernments ito ire-think itheir isupply-chains ifor iessential iitems.

i The iJapanese igovernment iallocated iUS$2.2 ibillion ito iincentivize iJapanese ifirms ioperating iin iother iAsian

i countries ito irelocate ito iJapan. iIn ithe iUnited iStates, ia ibill iwas iintroduced iin ithe iUS ito itake ion ithe iensuing

i cost iimplications iof icompanies ithat ichoose ito ishift itheir iproduction ibase ifrom iChina. iAlso, iIndia iis

i exploring iways ito iattract imanufacturers ifrom iChina ithrough ia ireduction iin icorporate itaxes, iamong iother

i incentives. i

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 On ithe iother ihand, ithe iglobal iimpact iof iCOVID-19 ihas ialso iled ito ithe itemporary iinstitution iof

i protectionist ipolicies ion icertain igoods iand iservices ito imeet idomestic iconsumption ias iagainst iglobal

i demand. iFor iinstance, idue ito ipossible ishortages iof iessential iitems isuch ias idrugs, iprotective igears, iand

i ventilators iin iexporting icountries, ithe iWorld iTrade iOrganization-WTO i(2020) iallowed isome itemporary

i export irestrictions. iThere ihave ialso ibeen inoticeable irestrictions ion ithe iglobal isupply iof isome ifood iitems

i and iindustrial iinputs iin irecent itimes, ias icountries iseek ito iconserve ithese igoods ifor itheir iown iconsumption.

i Consequently, imost iemerging imarkets iand ideveloping icountries i(EMDES) icould ibe iimpacted iby ithese

i possible iexport irestrictions, ias ithe iimporting icountries imay inot ihave ithe icapacity ior icapability iin ithe

i production iof isuch irestricted iitems. i

Consequently, ithe iindustrialization iand ieconomic igrowth idrive iof ideveloping icountries, iespecially iin

i Sub-Saharan iAfrica icould ibe iaffected, ias ithe iregion ihas ibeen iseverely iimpacted iby idisruptions iin ithe

i value iand isupply-chain ilinkages ito iinternational imarkets ifor icommodities, ifinancial iflows, itechnology

i inputs iand ihuman icapital. iTherefore, ias inations iappear ito iresort ito ihigh ivertical iintegration iand iregional

i or idomestic idiversification ito iweather ithe ibroad-based idisruptive ishocks ifrom iCOVID-19, iAfrican

i countries icould ilag iin ithe iglobal idevelopment icurve idue ito isignificant idependence ion iless iefficient iintra-

regional isupply ichains, iwhich ihave idepressed itrade iwithin ithe iregion. iEvidently, iintra-African itrade istood

i at i16% iin i2019, iwhich iis iconsiderably ilow icompared ito i67% iin iEurope, i58% iin iAsia, i48% iin iNorth

i America, iand i20% iin iLatin iAmerica. iFurther ianalyses irevealed ithat iAfrica’s iimports iand iits ireal iGDP

i growth iare ihighly icorrelated, ias ithe ithree ilargest ieconomies iin ithe iregion i(South iAfrica, iNigeria iand

i Egypt) iaccounted ifor imore ithan i40% iof itotal iimports iin i2019. iThis ishows ithe iregion’s ilong-term igrowth

i and iprosperity idepends ion ithe iseamless iinflows iof igoods, itechnology iand icapital ifrom ithe irest iof ithe

i world.

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