Revisiting the supply chain

Covid-19 has upended the supply chain! Time for a revisit.

In the 1960s, it was called the “Purchase Department”. In the 1980s, it was renamed ‘’Procurement Department’’. Later, a fancy nomenclature emerged: “Supply Chain”. The Japanese introduced the “Just-in-Time” inventory. Warehouses in Advanced Corporates kept only one week’s inventory. Saved on working capital and warehousing costs. The big corporates did not factor in Nature – pandemics, floods, typhoons, earthquakes etc.

Supply Chain has been a military essential. From the times of the Neo-Babylonian Empire. Much later Napoleon stated, “An army marches on its stomach.” Many wars have been lost because of fragile supply links. Hitler’s Northern War move failed because of supply problems. Or else, the results of WWII would have been different. In the Falklands War in 1980 between the UK and Argentina, UK emerged victorious. Surprising, considering the UK had to reckon with a 4000-mile supply chain. In the Pakistan Army, the Quarter-Master General (QMG) is head of the Supply Chain. The “Big Daddy” of supply chains in the 1980s was Lt-Gen Saeed Qadir. He was QMG, Federal Minister for Production and Chairman National Logistics Cell. One doesn’t get more “Supply Chain” than that. To put it mildly, nothing moved in Pakistan without General sahib’s command.

The Silk Route in early history was the original Supply Chain. The world commerce, in fact the civilized world, was centered on the Silk Route. When Alexander the Great of Macedonia cast his eyes far and wide, to plan his conquests, he decided to ignore Europe. It was a poor, unorganized wasteland. All the riches lay along the Silk Route. So to with Julius Caesar. The current Chinese BRI (Belt and Road Initiative) is an attempt to reinaugurate the Silk Route. The BRI also bypasses the maritime choke points that are in control of other powers — the Hormuz, the Malacca, the Suez, etc.

In the 1970s, the Japanese industrial juggernaut was in full play. Raw materials of every kind were required. The big corporates sowed their own. The Japanese trading companies like Mitsui, Mitsubishi, Marubeni, Sumitomo also scoured the world for industrial inputs. The supply chain was organized, refined and raised to the next level. About this time the US multinational corporations felt the need to be more competitive. They could not — given the wage levels and unionization. The obvious move was “offshoring”, i.e., shifting production of components to low wage countries. The components were finally assembled in the USA. This resulted in the supply chain logistics and management to be raised to a fine art. By 2000, US MNCs and some European were only managing some critical aspects like R&D, Innovation, Marketing and Branding. The low-grade production was “Offshored”.

The Covid-19 Pandemic and other Nature-induced problems have upended the Supply Chains and JITs (Just in Time). Everything is delayed – cars, fresh food, processed food, energy supplies, medicines, textiles, electronics, living staples. Supply Chains have become the problem, not solution. Back to the drawing board. A radical rethink is underway. The new supply platform, when it emerges, will have to incorporate National Security, Corporate Security, Ecological Security, Block Chain, Cyber Security and the other unusual factors.

In earlier times, around 1500, the first European Supply Chains emerged. This was the Slave Trade. Spanish and Portuguese traders ventured into the Americas (the New World) and extracted unimaginable wealth. Soon, Spain was the Master of Europe, with Portugal close behind. The European traders cashed in on the Slave Trade. Ships would sail, from European ports, south along the African west coast. The ships would stop at various destinations and capture or buy slaves. Then they would sail to their colonies in the Americas. The journey was one notch below Hell. Slaves were only allowed a space of 5ftx3ft. One meal a day. Sick or infirm were tossed overboard. The slaves were offloaded in Brazil, Guyana and the Caribbean Islands. Later on, in the cotton growing southern states of America. After discharging its Slave cargo, ships would load up on silver, gold, tobacco and sail to Europe. This Triangular Trade enriched Europe beyond measure and made the European States the superpowers of their times. The Silk Route was relegated to a lower ranking. Slave Trade still abounds.

The remaking of the Supply Chain is also going to have a major impact on the most lucrative and deadly business – Narcotics. Narcotics have shaped world history. The Opium Wars, China, Hong Kong, etc. The naturally extracted drugs are central in certain areas – Afghanistan, Columbia, the Golden Triangle in Myanmar/Thailand. For centuries, the drug traffickers have used ingenuity, bribery, forceand technology to shape their Supply Chains to the lucrative consumer markets. They have stayed one step ahead of the law enforcers. It’s an ever-changing game. VVIP aircrafts now land at destinations in Europe. Unchecked by customs or DEA. Each trip nets more than $10 million. Looking 20 years ahead, all this is going to change. Synthetics will take over. Synthetics have a distinct advantage – the labs can be set up close to the consumer markets. The long, dangerous supply chains will mostly vanish, or operate locally. Ice, Meth, Rainbow and other drugs have already taken significant market share. Thanks to the Sacker Family (of USA) and Cooperative Doctors (of USA), opioids are surely replacing the traditional drugs.

(The writer is a former Executive Director of the Management Association of Pakistan)

Copyright Business Recorder, 2022