Businesses are responding to the pressure conflict in the Middle East is placing on supply chains with a focus on three key elements, according to ANZ’s Nicholas Anzman — continuity, contingency, and liquidity.
The conflict that began in late February has disrupted supply chains around the world, creating levels of uncertainty not seen since the COVID-19 crisis in 2020, when the global economy ground to a halt.
Speaking to ANZ Institutional Insights on video, Anzman — ANZ’s Head of Trade and Supply Chain Product Management and Development — said not all the lessons of the COVID-19 crisis had been heeded, and some contemporary challenges in supply chains are unprecedented.
“COVID was a great lesson to understand the value of diversification,” he said. “Unfortunately, after COVID, there was obviously continued pressure, in a normalised environment, to reduce costs.”
These economic drivers pushed supply chains previously managed to allow flexibility for risk — the so-called ‘just-in-case’ approach — to move back toward a higher-risk ‘just-in-time’ one, according to Anzman.
“While I would like to say that our supply chains are resilient and that we've learned a lot through the COVID crisis, unfortunately we're finding [the current] situation is… actually exposing some vulnerabilities that were not contemplated during that COVID period.”
You can watch the video below to hear more.
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The primary response from businesses operating in supply chains across the Asia Pacific, and observed by ANZ, according to Anzman, has been firstly to focus on continuity and stabilising their supply.
Businesses are “working very quickly with their suppliers, their logistics partners, and importantly, also government and financial partners,” he said, with a focus on how they “identify where critical componentry is coming from”, and “make sure that continuity of supply resumes”.
The next element of affected businesses, Anzman said, is contingency.
“If continuity is not working — and we're seeing that certainly in certain parts of the more critical areas of supply chains — then they're looking at contingency measures,” he said.
This has notably been a factor in sectors such as agribusinesses, according to Anzman.
“Contingency arrangements about finding alternative means to get that supply accelerated into markets like Australia are definitely being deployed at the moment,” he said.
“And we're seeing those scenario plans rapidly being developed at the treasury, the procurement and the manufacturing operations level [within businesses], to understand how they can coordinate and to get the supply in and critical componentry activated.”
The final focus is on operational liquidity, Anzman said.
“All this doesn't materialise without ensuring you have the ability to deploy cash flow where you need it most,” he said.
This focus is seeing treasurers and chief financial officers assess the impact of impacted inventory management on their balance sheets and working capital, he said.
The questions become “essentially, where am I going to find the financial resources to make that happen?” Anzman said.
Watch the video above to find out more.
