Navigating Global Trade During a Worldwide Pandemic
When COVID-19 emerged, global trade was brought to a standstill. In fact, the World Trade Organization expects nearly every region to suffer double-digit declines in growth, global commerce to fall by up to 32%, and sectors with more complexity, like the automotive industry, to take even steeper dives.
Manufacturers in Michigan, who export over $56 billion in goods every year, were hit hard by the fallout, too. Today, the global economy has slowly begun to recover, but as factories reopen and ships once again leave our ports, we still live in an environment weary of the omnipresent virus. In order to maintain trade functions that supply goods to the world, the industry must adapt to the “new normal.”
Moving forward starts at the beginning of the supply chain. Before COVID-19, it was acceptable to have one or two manufacturers from the same region producing a select few components. Today, manufacturers are moving to diversify producers around the globe to ensure redundancy, so that if a part of the world gets shut off, like China did in March, manufacturers will not be scrambling.
Risk assessment and scenario planning have also become imperative. Six months ago, planning for a global pandemic was at the bottom of most executives’ to do lists. The result was that they—like the rest of the world—were unprepared when one came.
There are many questions to face going forward. Do leaders understand the logistical risks of a crisis? Is our workforce prepared to continue working remotely, and can they ensure quality of mission-critical functions? Has each division assessed why and how a crisis would impact their ability to execute their responsibilities?
Global trade did not have the answers during the beginning of COVID-19, but manufacturers are catching up fast. Getting answers to these questions and others has become priority number one, because when the next catastrophe strikes or a second wave of the virus comes, the industry simply cannot take another broadside.
As the pandemic has shown, cash planning and financial strategy is imperative. Early on, many companies did not have enough cash on hand to weather the crisis for more than a few weeks. Other companies had to scramble to find ways to take care of immediate needs, such as payroll. The impact of COVID-19 has illuminated the importance of financial and operational planning to be prepared for the future, allowing companies to handle short-term crises and plan for long-term health.
Companies need to consider several strategies to be prepared; such as embracing the digitization of the supply chain. This change that has been decades in the making, and COVID-19 has been a catalyst. Besides the logistical and economic values of digitization, shifting trade to a virtual platform allows management to identify risks and interruptions faster, putting them a step ahead in addressing the risk, finding another manufacturer, and managing expectations.
Shifting online has equal value on the consumer side, and making the shift to omni-channel distributions and cooperating with logistics service providers will help protect sales and consumers alike.
Be it a second wave of COVID-19 or something else, one thing is certain: another crisis will come. Companies that are proactively adapting to the “new normal” will be ready.