Bill Gates spoke about the difficulty in containing virus in a now famous Ted talk of 2015. The unhindered devastation caused by COVID-19 has exposed a vulnerability in medical capabilities. This experience has also forced a re-think on the tried and tested business models.
‘Focus on core and outsource the rest’ has long been a mantra for cost competitiveness. The multi-national businesses relentlessly pursued this strategy to a point that the only source left was China for them. The risk of putting all eggs in one basket was not perceived as too high until the past few years when China’s regional assertions created worries in the global political order. Further, the start of Covid19 in December 2019 ultimately resulted in the complete cessation of supply chains originating from the country.
As global businesses got shut in quick succession, the sourcing strategies are now in question and new rules are being written on Risk management.The thought that survival critical commodities (Medical supplies, food,textiles & core energy, and communication infrastructure) should never be outsourced is gaining ground. A completely local value chain for such items is justified as nothing can be more important to a country than its safety and survival. The upcoming tough financial environment is likely to wipe many in the SME segment without substantial Government support.
Some hard lessons are being learned. Business operations could be forced to vertically integrate the processes that were out-sourced so far and increase the adoption of Digital. Purchasing would surely rewrite its source selection rules. But if & when the disease gets controlled, would the business also return to the old ways? Someone has ironically said – “The one thing that we have learnt from history, is that we never learnt anything from history”