Impact of C19 on the Groceries and Pharmaceutical Supply Chain
Forrester has predicted that the global loss in the retail sector will likely hit $2.1 trillion in 2020 and will take four years to overtake the levels of growth seen before the pandemic.
Although this prediction might differ for various countries, it is assumed that grocery offline sales will see a 20% decline in growth overall, while ecommerce growth will spike.
In the US, sales are expected to drop by $321 billion this year, down 9.1% from 2019 and Canadian Retail spending has been predicted to fall 7.7% which is a loss of about $25 billion.
The picture is pretty much the same all over the Globe, with an anticipated loss of 260 billion euros in European countries and a $192 billion loss in China.
But this scene is the aftermath of COVID-19.
In an attempt to limit the exposure of the lethal and contagious virus, consumers started making purchases for daily essentials via online grocery marketplaces, when in every country it started spreading uncontrollably. Major spikes of online sales were due to panic buying which resulted in hoarding. This has resulted in the Businesses to suffer, and the conversions to fall. Items such as toiletries, sanitisers, disinfectants are flying off the shelves and thus leading to a gap in the demand and supplies. And this is where the chain got disrupted.
Demand was huge, people were buying impulsively but due to various Government rules under lockdown product productions became limited along with severe constraints in logistics. The holistic Supply Chain Management was in turmoil and mostly shrank to hyper-local.
And this disruption in Supply Chain Management is not only in Retail but had a greater impact on people’s life due to the lack of availability of Medicines too. COVID-19 outbreak has put two of the largest global producers of active pharmaceutical ingredients and generics – India and China at stake. Since the breakout of the virus, supply from their manufacturing facilities has reduced. In addition to that:
India has restricted the export of 26 active pharmaceutical ingredients… which represents about 10 per cent of India’s export capacity,” according to FDA Commissioner Stephen Hahn.
On the other end of the chain in the US. The US is the largest consumer of pharmaceutical products of about 45-50% of the market. Once the disruption in India occurs due to the unavailability of raw materials from China to produce medicines in India, the US will surely get affected.
Challenges faced by the Grocery and Medicine Industry:
To summarise, irrespective of the Grocery or the Medicine Industry, the following challenges are being faced by the brands:
Change in Business Model: In Retail, consumers have shifted to online shopping or no-contact deliveries rather offline pick-ups.
Poor Supply Chain Management: Both in retail and medicine, the supply chain has been disrupted due to Government restrictions and lockdowns.
Less Workforce: People are afraid of touching infected people or coming in contact with them. There have been innumerable cases where the person in service has died of COVID–19. This is creating a fear wave. Along with these, restrictions on production in full capacity have been implemented by the Government. Hence, there has been a huge loss in production due to a lack of human resources.
Delivery Delays: In most of the grocery shops or Medicine shops, delivery partners work on a contractual basis. During this crisis period, they are not showing the willingness to work due to the fear of getting infected.
This is again making it difficult for businesses to deliver all the food items at the doorstep of their consumers in real-time.
How Grocery and Medicine Supply Chain can manage even in COVID-19
As an outcome of such a disruption, grocery ecommerce marketplaces need to brainstorm and devise strategies to restore the operation of grocery stores and medicine supply chains.
Along with the critical evaluation of the persistent demand and transition in the consumer’s buying habits, a strong framework that can handle the influx of orders and meet the customers’ demands is required. Apart from this, ecommerce marketplaces will also have to reconsider their current delivery strategies. Following a dependable approach like keeping the customers informed with clear and precise information about the available products will positively impact their grocery purchasing habits.
Coming to Medicine Industry, it is a case of an incredibly fluid situation. Pharmaceutical companies need to constantly monitor the issues and assess their possible impact on the immediate future, as well as the more medium and long-term effects. Companies must think around corners and anticipate problems before they become larger immediate issues.
If the Lockdown does not continue for long, India has enough stockpiles of necessary raw materials for medicine production. But in the meantime, the companies should start preparing for the expansion of their manufacturing units so that the materials can be available locally and cross border dependency decreases.
The Coronavirus pandemic has required marketers everywhere to rethink their marketing campaigns. Consumers’ lives have been completely overhauled and, as a result, the strategies that marketers once found successful will no longer work effectively. Rather than shifting strategies, many marketers have paused their efforts in response to the virus. Consumers are spending more time than ever on devices and that allows food and beverage brands or Grocery brands to communicate with consumers in an authentic, transparent and meaningful way.
In addition to that in the Pharmaceutical Industry, as mentioned before, source switching can be expensive in both terms of cost and time. Companies should evaluate their supply networks for single points of failure and build fail-safes into the system by identifying alternate sources. While building alternatives can come with increased costs, the downside of not having protection when you need it is more expensive.
Designing resiliency into the supply chain should also incorporate syncing inventory at the right nodes of the network. This does not mean increasing the working capital. It is about rightsizing the inventory in consideration of risk and resiliency.
The impact of Coronavirus on the pharma industry is yet another reminder of the need to factor risk and resiliency into designing the supply networks.
But to resonate today, whether it is a Grocery brand or pharmaceutical brand, it must be flexible and be able to create content and respond to changing situations quickly. Additionally, brand loyalty has taken a back seat as consumers have focused on pantry loading in case of grocery shopping. Brands need to use this time to stay top of their mind and create content that will help consumers get the items they need without putting themselves at risk.
Keeping up with increasing demand while planning for risk mitigation will be the most important strategy for companies navigating the coronavirus in the Grocery and Pharmaceutical industry over the next few months. If manufacturers can find ways to adjust their supply chain as necessary while keeping production and distribution ramped up, they will likely be able to survive this period of uncertainty.