Mr. HO Lap Kee, Sunny, Executive Director, The Hong Kong Shippers' Council is Guest presenter on CILT Covid-19 Best Practice Response Webinar

1. 1
June 3, 2020
Speaker :
Executive Director
Sunny Ho MH, JP, FCILT
CILT Webinar
Global Shipping and the Supply Chain
The Hong Kong Shippers’ Council

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Changes in Supply Chains
The COVID-19 outbreak has
shaken global supply chains.

While the full impacts are not known yet,
several changes can be anticipated.

It is important to understand the challenges, the
suggested mitigations and their changes over time,
while bearing in mind the big diversity for different
sectors.


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China locked down the nation approaching end of
January during the Chinese New Year holidays.
Traffic stopped and factories closed.

Government workers and volunteers guard at the entrance to
a residential block locked down to curb the COVID epidemic
in Wuhan in central China's Hubei province, Feb. 21, 2020

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Source : South China Morning Post Feb 5, 2020

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Suggestions for Supply Chain Managers
 Avoid single sourcing, establish separate and
independent supply chains elsewhere from China.
 Trace further down along the supply chains to find
out weak links/sectors, particularly for strategic
components and parts.
 “From Globalization to Regionalization”
- Prof. Cartos Cordon Eric Buatois
 Establish flexible and adaptive supply chains.
 Accelerate digitalization and cloud usage.

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Technology-led business models.
Urgent need to reduce dependency on physical labor
across transportation, logistics and warehousing.

Factories modularize production and shift / adapt lines
due to demand changes.

Business – making critical systems available on the
cloud.


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For Shipping and Logistics :
To deal with the challenges for visibility and reliability
Carriers started cancelling services, number of
blank sailings sharply increased, etc. Booking
acceptance, declines, rejections, freight charges,
etc. were chaotic.

Operations and services were disrupted by port
closure, road traffic put on halt, schedule changes,
and service stoppage.

Capacity crunch in the air freight market due to
cancellation of passenger flights.


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Yet, situation kept changing
By mid-February, it was clear that alternative
production in places like Vietnam, Myanmar, etc.
failed to offer substitute solutions. These new
production bases relied very heavily on China for raw
materials and spare parts.

Low-value-added products : 2-3 months of production
input on hand
High-value-added products : 2-4 weeks of components
Before alternative sourcing from India, Kenya etc
began, these economies started lock-down.


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What are the difficulties and challenges that procurement
managers and manufacturers are encountering?
Amfori (全球貿易協會) survey, April 2020
For procurement managers

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For manufacturers

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Questions
How could Post COVID-19 supply chains cope with
these challenges?
(1)
What will be given priorities?(2)
Who are in better positions to implement the changes?(3)

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Considerations
Supply chain management will be unable to resolve
difficulties like business contraction.
Many companies will restrict capex.
What would be given priorities?




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More on Challenges

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Trade has flatlined in every region affected by the lockdown.

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Consumers are not spending.

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Liquidity remains a big issue.

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CFOs are planning to curtail capital
expenditures, anticipate more layoffs
and plan to cut IT spending to bolster
finances amid the COVID-19
economic fallout, according to
PwC's latest survey.

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67% of them expecting deferring or cancelling planned
investments

Facilities and capital expenditures are the two top areas,
but 53% of CFOs say IT spending will be cut.

- PWC (April 13, 2020)

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Specifically for supply chain :
Supply chain managers will take the following measures
Business resilience
Procurement control tower in place (e.g. active
management of open pos and delivery schedules)

Rationalize short/medium-term Capex
spending unless it offers a clear longer-term
competitive advantage

(three categories) :
Reduction of Opex spend to build financial
flexibility (e.g. marketing)
“How supply chain, finance and procurement are
navigating covid-19” Consultancy.edu (April 30, 2020)


21. Recognition of distressed suppliers and
identification/renegotiation of cost potentials
through reduced cost structure

21
Liquidity
Ensure rigorous cash management and reduce
non-critical use of cash

Adjust working capital (e.g. inventory
management) to ensure ongoing delivery

 Conduct scenario-based planning and develop
action plan accordingly
Redefine budgets and savings targets by
category and geography

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Supply chain stability
Mobilize central “war room” to evaluate and
address supply vulnerabilities and monitor risk
daily

Conduct Covid-19 supplier audit, assess critical
vendors and provide action oriented feedback

 Identify and implement alternative supply
scenarios and risk mitigation strategies (e.g.
new local sourcing)
 Implement opportunities to partner with other
companies to optimize resources
Provide financial/non-financial support to
value chain partners


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press pause on their Industry 4.0
roadmaps—with only the bare
minimum adoption of emerging
technologies like the internet of
things (IoT), augmented and virtual
reality (AR/VR), or blockchain
vision of Industry 4.0 as a
journey, or a roadmap
automation, analytics, and
cloud, will attract more
spending because of their
potential in offering
quicker cost savings
seek technology that can
produce immediate cost
savings like automation or
cloud
Priority - in the short run

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The post-Corona future will see far
higher penetration of AI, robots and
collaborative tools.
- Alexander Gunde,
President Technology
DHL

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Digitalization of procurement process
Production automation
Data analytic-led supply chain management



Brave New “Digital” World
Trends：

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Who will lead the changes?

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Results from BloombergNEF National Industry Digitalization Ranking
Source : BloombergNEF

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Source : http://uis.unesco.org/apps/visualisations/research-and-development-spending/

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COVID-19 exacerbates the gap between winners and
losers.
Those come out of the crisis stronger will be in better
position to expand.


Regarding the supply chain and logistics industry：
Crisis for some would be opportunities for others.

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Thank you!