Locking down Australia may halt COVID-19 in its tracks. But experts are torn over whether or not the means justify the ends.
When will the coronavirus crisis be over? We don’t know for sure.
We do know it’s going to get worse before it gets better. And authorities are openly warning it could linger for months to come.
Whatever the case, it will be a public health and economic disaster.
And attempts at balancing the two has highlighted how fragile our interconnected world is.
“Flattening the curve” through social lockdowns will save lives. But that act will bring disruption.
We will soon be seeing changes to everything from online schooling to industrial strategy even as fragile business models are rethought and reworked.
“In Australia, inbound tourism and education and outbound exports of premium and perishable foods have suffered immediate impacts,” Australian legal and consulting firm MinterEllison notes.
“However, it is expected that over the next few months a new wave of direct and flow-on impacts will significantly disrupt many industries as the full suite of demand and supply effects hit global supply chains.”
So not only are chances high you’ll get sick. You’ll also experience unexpected shortages and income challenges.
South Korea is suffering from China’s drastic population lockdown. Its carmakers have had to halt production after supply lines of vital components and materials dried up. It is a similar story for Renault and Peugeot-Citroen of France: Their cars are assembled in Wuhan.
Hong Kong triggered the international toilet paper hoarding trend because it was a particular problem for the island state. All their supplies came from the Chinese mainland.
And that’s the problem with China being the “world’s factory”.
Everything from iPhones to clothing, toys to medications are produced there. Often exclusively.
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Now more and more nations are falling under COVID-19’s shadow.
And almost every nation is a specialist producer of something.
Fridges. Washing machines. Footwear. Clothing.
All of these products may soon become scarce.
“Could COVID-19 be the black swan event that finally forces many companies, and entire industries, to rethink and transform their global supply chain model?” asks international auditors and economic forecasters Deloitte.
“One fact is beyond doubt: It has already exposed the vulnerabilities of many organisations, especially those who have a high dependence on China to fulfil their need for raw materials or finished products.”
And that’s before COVID19’s impact on local service providers is taken into account, once social distancing comes into force.
It may seem counterintuitive, but closing schools could cause staff shortages.
Yale University social scientist Nicholas Christakis told the American Association for the Advancement of Science’s Science magazine that shutting schools helps slow the spread of COVID-19. But it comes at a price.
“Proactive school closures — closing schools before there’s a case there — have been shown to be one of the most powerful non-pharmaceutical interventions that we can deploy,” he says.
“When you close the schools, you reduce the mixing of the adults — parents dropping off at the school, the teachers being present. When you close the schools, you effectively require the parents to stay home.”
And that’s the problem.
This creates staff shortages. Doctors. Nurses. Paramedics. Orderlies. Cleaners. Couriers. Cooks. All have a vital role to play in a pandemic.
Proactive school closures can reduce the spread of a virus by up to 30 per cent. Reactive closures – only after a teacher or student is diagnosed ill – slows it by about 25 per cent.
“This has value,” Christakis said. “It means that the incidence on any given day is lower, so we don’t overburden our health care system.”
It also reduces the drawdown on a workforce, which is why the timing of school closures is such an important call.
“Health care workers could be taken out of commission to care for their own children precisely when we need them at hospitals. Parents could lose job opportunities,” Christakis said. “This is why in Japan, they’re providing a basic income to parents during the closure. It should be rightly seen as a state expense.”
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Forget the hordes of desperate shoppers at the supermarkets. Unprepared governments are doing the same thing. They’re desperate to get their hands on medical face masks, virus test kits and emergency theatre ventilators.
Like toilet paper, their supply has dried up.
Like toilet paper, the amount of expensive hospital equipment – such as the ventilators used to keep critical COVID-19 sufferers alive – is optimised to suit average workloads.
This virus isn’t average.
And the full impact on the availability of medications is yet to be determined. Then there’s the demand for protective suits, masks, goggles.
China’s specialist factories are again gearing up – with at least a two-month lag in their own supply chains.
But, now, the international producers that ramped-up production to soften this blow are themselves facing lockdowns as the virus marches across Europe and the US.
“India is restricting generic pharmaceutical exports, and the US Food and Drug Administration is reporting shortages of unnamed drugs,” MinterEllison notes. “These, all, in turn, have immense downstream impacts for other reliant businesses and consumers.”
All of a sudden, “self-sufficiency” has become the catch cry in political halls of power used only to the word “efficiency”. But the specialist manufacturing equipment isn’t cheap. It isn’t easy to produce. Stockpiles are virtually non-existent. And operators need training.
AT WORK AND HOME
Suburban supermarkets have been suffering for some time now. Specialty stores are struggling to compete with the low-overheads and convenience of online shopping.
With fears of infection and the looming prospect of social lockdowns as seen in Italy, they’re already taking a severe hit.
But there’s also the public mindset.
Analysts say it’s likely to change.
The Great Depression of the 1930s burnt a “waste-not, want-not” ethic into the minds of a generation. Such self-imposed austerity lingered for decades.
The Global Financial Crisis (GFC) of 2007 had a different outcome. Wages were kept low while businesses and executives raked in the profits. Belts were tightened as the cost of living rose.
Whether or not our super-consumer society survives this epidemic is yet to be seen.
Meanwhile, analysts around the world are predicting a significant change in our open-plan office mindset.
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People are aware such spaces can be hotbeds of contagion.
And the highly touted benefits of roundtable discussions are likely to be revealed as overrated.
“Once effective work-from-home policies are established, they are likely to stick,” a workplace trends consultancy manager recently told US media.
Others don’t agree.
“I think most businesses and certainly the behemoths in the US and elsewhere will not fail to go back to normal business practices,” Columbia University Nobel laureate Edmund Phelps said.
What happened in China is a warning sign of things to come.
Its significant manufacturing hubs of Guangdong, Zhejiang and Jiangsu were locked down – though these are now being lifted.
And the fallout is hurting Tesla’s bottom line. Its Model 3 electric cars are manufactured in a $US2 billion “Gigafactory” in Shanghai. The extended shutdown has halted its supply.
But Beijing is determined to get its factories powered-up once again. It sees an opportunity to entrench its manufacturing dominance as international competitors hunker down.
“(Chinese) trucking capacity to ship goods from factories to ports is at around 60-80 per cent of normal capacity, with goods facing delays of around 8-10 days on their journey to ports,” trade analyst firm McKinsey & Company’s “Implications for business” report reads.
Uncertainty, however, reigns.
“Customers that have pre-booked logistics capacity may not be able to use it, while customers may compete for prioritisation in receiving a factory’s output,” the analysts report. “The unpredictability of the timing and extent of demand rebound could cause confusing signals for a number of weeks.”
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AN UNCERTAIN FUTURE
“A decades-long focus on supply chain optimisation to minimise costs, reduce inventories, and drive up asset utilisation has removed buffers and flexibility to absorb disruptions ─ and COVID-19 illustrates that many companies are not fully aware of the vulnerability of their supply chain relationships to global shocks,” the Deloitte report states.
It’s part of a growing realisation our globalised world has changed.
“In what might become the ‘new normal’, diversification of supply chains which are more ‘immune’ to external shocks may counter the previous benefits of simple cost reduction,” MinterEllison comments.
But the world is in a surprisingly good position to exploit this sudden wake-up call.
“Fortunately, new supply chain technologies are emerging that dramatically improve visibility across the end-to-end supply chain, and support companies’ ability to resist such shocks,” Deloitte reports. “Leveraging advanced technologies such as the internet of things, artificial intelligence, robotics, and 5G, digital supply networks (DSNs) are designed to anticipate and meet future challenges. Organisations that deploy DSNs will be ready to deal with the unexpected.”
Jamie Seidel is a freelance writer | @JamieSeidel