As China emerges from lockdown, new consumer behaviors, technological innovation and ways of doing business are being confronted.
The novel coronavirus is one of the most challenging events in recent memory. The sheer scope of the disruption is, outside of periods of global conflict, nearly unprecedented in its scale and speed. While most managers both within and outside the private equity space are rightly focused on solving the most immediate threats to their businesses, attention will soon shift to a new set of challenges –reopening large-scale economies.
We can look to China for a measure of reference. On April 8, after 76 days, Wuhan’s lockdown lifted for its roughly 11m residents; non-essential businesses reopened, travel bans were ceased and the city went back to work, albeit under close monitoring. As the country begins to emerge from lockdown, businesses can learn four lessons from China’s reopening:
1. Risk mitigation for the workforce
Keeping the workforce safe and healthy continues to be the number one priority for companies across the world. As China’s businesses begin to reopen, businesses are taking steps to try to reduce the potential for future hotspots to emerge.
Across all businesses, a personal health code system enabling contact tracing has been launched and recognized across different provinces to speed up the process of getting people back to their company. Temperature checks continue, with businesses positioning infra-red thermometers at entrances. Start times are staggered and flexible hours are encouraged to reduce congestion at rush hours. Meetings are limited in the number of people that attend in favor of increased use of online meeting platforms. Workers are provided with personal protective equipment to limit the spread of airborne particles. Elevator buttons and door handles are cleaned hourly, hand sanitizer and other cleaning supplies are made widely available and workstations are spread out as much as possible.
In factory settings, some businesses are running more shifts per day, with fewer workers on each shift. They’re also limiting the movement of staff in each production process and eliminating the need for workers to cross over to other processes. Mealtimes are staggered to allow for fewer people at a time in dining areas.
Communication with staff is critical, so firms are pushing communications regularly via email and other apps (like WeChat) on COVID-19 matters. They’re also organizing staff into teams to help ensure key messages are fully communicated in a timely manner via team leaders. In some cases, companies are tracking staff via questionnaires, where each week employees answer questions about their and their family’s health, their travel histories, and other relevant information is collected.
2. Reassess and secure supply chains where necessary
One of the first and most visible impacts of the virus was exposing the vulnerability of global supply chains to disruption. As factories across China closed, both domestic manufacturers and those located abroad were unable to source many of the components they required. As China’s economy begins to reopen, supply chains remain a key priority. In some cases, purchasing departments are assigning extra full-time staff to call suppliers multiple times a week on orders and to closely monitor logistics. In some cases, staff are visiting suppliers’ factories to help ensure orders are properly executed. In other cases, companies are rethinking their supply chain more holistically and attempting to reduce their reliance on subcontractors and increase vertical integration, bringing additional capabilities in-house to reduce future disruptions.
Additionally, many companies continue to diversify their production locations. The last several years have seen many companies, from within China and abroad, expand capacity to Southeast Asia to mitigate high production costs and in response to ongoing global trade tensions. Initially, these companies were less impacted during the peak of COVID-19 in China, as they could move the orders to offshore facilities. Now, however, with China starting to reboot its economy, supply chains in Southeast Asia are facing more severe challenges from COVID-19, leading some companies in China to consider moving some of their supply chain back to China or finding substitute suppliers in China.
3. Adjust delivery models where necessary
The coronavirus hit the world at a time when many business models were already under huge amounts of pressure to adapt to technology-enabled competitors and changing consumer preferences. As companies reopen after the lockdown, many are likely to find some of the delivery models they’ve used in the past may no longer be optimal.