M&S looks ahead to post-pandemic world

WHAT’S NEXT?

OUTLOOK • DAVID KEW, MANAGING DIRECTOR OF M&S LOGISTICS LTD, LOOKS AT WHAT A POST-COVID WORLD MIGHT LOOK LIKE AND WHAT THAT MEANS FOR THE LOGISTICS SECTOR

I WAS WATCHING one of the global financial news channels a few weeks back and this comment by Bridgewater Associates got me thinking: “Globalisation, perhaps the largest driver of developed world profitability over the past few decades, has already peaked. Now the US-China conflict and global pandemic are further accelerating moves by multinationals to reshore and duplicate supply chains, with a focus on reliability as opposed to just cost optimisation.”

The Covid-19 pandemic has brought a spotlight to tensions that have been brewing over the last decade and accelerated the current rise in nationalism and subsequent geopolitical tensions. This, followed by the already bleak global financial situation with growth in both government and corporate debt, coupled with low interest rates, leaves very little room for governments to manoeuvre. Have we reached the pinnacle of globalisation and are we in for a reshuffling of priorities?

From local and national lockdowns, imbalances in trade, blank sailings and container imbalances, to nations protecting their own self-interests (including the restricting of PPE and other essential exports), the pandemic has magnified the weaknesses in supply chains and led to a sense of national vulnerability. If political desire and commercial necessity lead to a diversification of risk and duplication of supply chains, what will this look like and how will it affect the chemical industry?

So far we have seen a change from just in-time planning to receivers being inclined to hold stock. Will this go further and to what degree will we see manufacturing splinter and migrate closer to market? If so, will we see segmenting along geographical or ideological lines and how will this affect trade flows?

EXPECT THE UNEXPECTED None of us could ignore the impact this pandemic has had on jobs and the economy. While those countries that have opened up sooner are seeing an increase in demand, we have to question whether, with job losses, this demand is sustainable. Since the bailout of 2008/2009, we’ve had lowering of interest rates, and in the West a stagnation of earnings. For many countries and businesses the levels of debt has increased to new highs. While many countries have brought in significant support packages, the effects of most of these are likely to be temporary in nature. This leaves governments across the globe with very little in their armouries to boost their economies.

As has been seen in the retail, hospitality, and travel sectors the level of indebtedness has led to some ‘unexpected’ bankruptcies.

THIS IS THE TIME TO INVEST IN THE INTEGRITY