Coronavirus threatens to shake up the expat supply chain

by nyljaouadi1
0 comment

In late March, Japan elevated its travel warning for Thailand because of the risk of coronavirus infection, warning its citizens to avoid travel and imposing compulsory health checks on those arriving from the country.

Japan’s consular advice might seem a moot point during a pandemic when borders are slamming shut; Thailand itself classifies Japan as a “high-risk country” for Covid-19. 

But more interesting is the reaction of Thailand’s Japanese expatriates — the kingdom’s biggest foreign investor community by far: the majority chose to weather the lockdown in Bangkok rather than return home. 

“Most of them are staying,” said Atsushi Taketani, president of the Japan External Trade Organisation, or Jetro, in Bangkok.

Thailand’s Japanese companies — bellwether manufacturers in electronics, carmaking and other sectors since the 1980s — have endured rocky patches before, including the Asian financial crisis in 1997-98, the political violence that convulsed Bangkok 10 years ago and floods in 2011.

During this year’s pandemic, the executives’ decision to shelter in place was partly pragmatic, Mr Taketani said. Japan now requires people arriving from Thailand to take a Covid-19 test at the airport and submit to a 14-day quarantine if they test positive. 

But the choices facing Thailand’s Japanese plant managers also point to a vulnerability now facing multinationals in Asia and globally. Call it the human supply chain — the essential Japanese professionals in Thailand, Americans and Brits in China, or South Koreans and Taiwanese in Vietnam needed to keep factories, car plants, banks, law firms and drilling platforms going. 

This is serious business. When Jetro polled 552 of its company members in Thailand last month about their chief coronavirus-related concerns, “the loss of opportunity to attend business meetings” in Thailand and abroad, and new measures affecting travellers such as quarantine came near the top, right after slower sales but above supply challenges. 

Some futurologists are describing the pandemic as the peak of globalisation, while consultants predict companies will need to shorten and localise their supply chains post-pandemic. 

McKinsey recently said the “next normal” would spur “a massive restructuring of supply chains” as production and sourcing moved closer to markets. 

Have we reached peak expat too? Will Old Filth (so named after the acronym for “failed in London, try Hong Kong”), Jane Gardam’s expat barrister from her novel of the same name, become a thing of the past? 

Not entirely, business people say. But companies will need to re-examine their deployment of international staff to make sure they are not left vulnerable by the next crisis when it comes. 

“Not all expertise can be put on Zoom or Skype,” said Alex Dolya, a procurement specialist for the Asia-Pacific region with BCG in Singapore. “Some expertise has to travel and now all the flights are grounded.” 

Companies will be resourceful and find a way, as they already are on the supply of parts. 

Editor’s note

The Financial Times is making key coronavirus coverage free to read to help everyone stay informed. Find the latest here.

When coronavirus hit China hard in January and February, manufacturers in Thailand and around Asia faced production problems but then adjusted. Samsung began flying some of the parts from China to Vietnam to make Galaxy phones, rather than trucking them. Vietnam’s garment manufacturers filled inventories with the Chinese-imported materials they rely on before its economy began shutting down, then moved from making clothing to protective suits and masks as lockdowns spread around the world. 

But designing logistics for the supply of human expertise is trickier, at least in the short term with borders and airports across south-east Asia closed.

BGC’s Mr Dolya mentions the case of a global energy group that recently shipped a complex piece of electrical equipment to Malaysia, where it is now sitting unused as engineers from Germany need to check it in person for a final quality control and cannot travel for now.

Other companies in Asia are implementing what they hope will be quick fixes. Japanese car executives are staying in Bangkok so they will be ready to reopen their plants. Some oil and gas companies are keeping their engineers on offshore platforms for longer stints than the usual 28 days to sit out lockdowns.

The bigger task, though, lies ahead in reimagining companies with simpler, less vulnerable structures that might not rely so heavily on globetrotting staff.

“Structurally, people are starting to think how to make expertise more local,” Mr Dolya said. “It may take time to do it.”

Follow on Twitter: @JohnReedwrites

Source link

Related Posts

Leave a Comment