COVID-19’s impact on supply chains and what it means for the future

Shelves and racks in distribution storehouse interior

When it comes to logistics and supply chains, the seismic effects of the global COVID-19 pandemic have been unavoidable in virtually all industries. The virus has brought so many aspects of business to a complete halt that everything from communication and management to cross-border relationships have altered drastically. In order to prevent their sectors from disappearing overnight, many companies have had to make major changes to their strategies.

Just as many predicted, once the scale of the worldwide crisis became apparent, online distributors saw a significant rise in sales across the board. While this was a positive for those seeing an opportunity to acquire more customers, it has come with its own challenges because of the exponential increase in demand. Supply chain gaps have almost become standard procedure amid the global chaos, but there are ways that your business can navigate them successfully.

Whilst a number of firms may assemble their products domestically, a large proportion of raw materials still come from further abroad – in particular China and India. This has meant that many companies in Europe and the USA have struggled to produce finished items as both the Chinese and Indian governments have imposed restrictions in a bid to stop the spread of COVID which of course have prevented exporters from continuing as usual.  

Furthermore many manufacturers have been reorienting their components and capacity to produce supplies necessary for combating the pandemic, which has led to further supply chain issues. For example the global push to produce a greater volume of hand sanitiser has led to a shortage of plastic bottles. Companies which needed similar bottles therefore lost out as a result of this and the lead times on purchases increased from around 1 week to 4+ weeks.

Overcoming problems with stock

To coincide with this, the competition aspect of making sure stock is at a healthy premium can be cutthroat, which is especially relevant in retail where domestic competition is pretty much guaranteed. To tackle this, suppliers should always be looking at alternative sourcing options. 

One option is for retailers to start dealing directly with brand manufacturers, so they aren’t reliant on the purchasing flow of UK suppliers. Going direct to the source does have its challenges, such as the aforementioned import costs, as well as processes which require additional research and work to understand if this isn’t the usual method. There’s also other things to consider such as currency fluctuations and freight times which all can heavily impact cash flow.

With direct to supplier relationships, there’s always the expectation to purchase higher numbers of stock or to only order in retail outers or master cases. This again can not only affect cash flow, but also potentially even storage space which at present times needs to be managed with constant attention to detail no matter what product is being sold.

Maintaining personal relationships in a virtual age

Recent events have served to illustrate the importance of personal relationships between purchasers and suppliers. Skype, WhatsApp and the like offer many opportunities to connect with suppliers. It’s also imperative to have good business social media presence both professionally and personally, with many suppliers using networks such as LinkedIn for outreach and relationship management.’

It’s predicted that ecommerce growth has accelerated by 4-6 years during the COVID-19 pandemic, and due to this many distributors have had to develop new relationships with suppliers and manufacturers who they haven’t dealt with before. In order to maintain a relationship, honesty, transparency, good personal relationships and regular communication are fundamental. Many suppliers understand that in order for them to succeed, their partners need to thrive. The more both sides understand each other, the more likely success will be achieved long term. It’s not about the profit made today, but the profit that will be made in 12 months’ time. 

Trust is perhaps the most crucial facet in progressing as a business and knowing when to instill that trust is a very understated skill. Often it’s a case of doing the basics and protecting yourself contractually. Supplier contracts which state the terms of business, and more importantly how problems are resolved and who is liable, are great to have. In most cases, an email exchange outlining the terms of the relationship can save a lot of hassle in the future, providing a form of documentation which can be reverted back to.

Despite the realisation that COVID-19 may be winding down, the repercussions are expected to be felt for years to come. Fine-tuning logistics and assessing your business is a necessity in these troubling times and can bring to light issues which weren’t visible before the pandemic. The unpredictability ahead is daunting, but it can be used to further business accruement and in turn achieve increased success if managed correctly.

This article was contributed by Vlad Vassilev, Director and CEO of the online eliquid store Vape Club