In Conversation with Brennan & Partners
19th March 2021
Hosted by Brennan & Partners, Mr Leif Johansson (Chairman, AstraZeneca), Professor Sir Mark Walport (Senior Advisor, Brennan & Partners) and Lord Sedwill (G7 Envoy for Economic Resilience) discussed the resilience and security of supply chains in a post COVID-19 world. The panel was moderated by Baroness Manningham-Buller (Co-President, Chatham House & Chair, The Wellcome Trust) and the session was opened and closed by The Rt Hon Sir Hugo Swire (Chair of the International Advisory Board, Brennan & Partners).
The conversation explored the challenges and opportunities brought about by COVID-19 but stressed the importance of relating them to the context of future major natural events that the world will face, be it the next pandemic, a toxic ash cloud, an impact of climate change or something else. COVID-19 has taught many lessons about the need for investment in better global and national public health protection against pandemic infection and about the power of genomics and modern vaccine technologies. It has also illustrated the vital importance of effective communication and cooperation at all levels and between countries.
Themes that emerged included:
>> Economics and business and government cooperation – business and governments need to consider long-term economic trends and make long-term economic decisions and investments to support supply chain resilience and security with emphasis not just on economies of scale but also economies of skills – either or both of which may reduce or increase the supply chain and the consequent necessity for protecting its resilience. An example is how China has invested in rare earth mineral extraction and Taiwan in massive semiconductors production. Strategic planning and where appropriate government intervention can be highly beneficial to local and international supply chains. However governments must not overreach and unsustainably distort or over-bureaucratise market forces. International and global supply chains have allowed economies of scale, and now skills, to develop and with consolidation within sectors. Some products are still priced similarly to what they were years ago because of these changes in supply chain development.
>> Infrastructure – vital for effective supply chains, the evolution of infrastructure offers significant opportunities, as well as risks or even threats. The competitive pricing of traditional transport, e.g. rail versus shipping, has helped breed somewhat unstructured interdependence between countries, China and the West most notably. COVID-19 has exposed the frailties of this, such as in the world’s stark PPE shortage just a few days in to the start of the pandemic. It is to be emphasised that technology and communication are increasingly critical pillars of global infrastructure. For the near future 5G is a good example of the part it will play as a driving force for innovation, connectivity and efficiency. There is however a lack of market resilience as, for a variety of reasons, 5G is confined to a very small number of dominant suppliers. When Chinese supply was affected by US sanctions there was insufficient capacity to meet demand.
>> Technology – there is huge potential for technology throughout supply chains, in relation to capacity, supply and security as well as resilience and continuity. For example, the digital validation of products within a supply chain to authenticate origin and quality. Further, distributed ledger technologies and AI can help inform decision-making and innovation. Education being increasingly linked to technology will help nurture associated skills and the inevitable continued advancement and application of technology and innovation.
>> Government – COVID-19 has shown how few governments were fully prepared for a pandemic, generally and in relation to supply chains for a range of both critical and non-critical products. Governments must apply their learning to be better prepared for the next major natural event, rather than become experts on past events. This means investment in supply chain resilience and insurance policies. Even if those policies aren’t all used, a number of them will be. Governments have the scale and position to influence behaviours and should also lead by example. This extends to procurement specifically and the need for more innovative and dynamic in purchasing from its own supply chains. The essential lesson is that government must try to respond effectively to business need for resilient supply chains.
>> Food security – as a specific case study, a lot can be learned from how food supply chains have stood up during the pandemic. Where other industries have collapsed, food supply has demonstrated its strength and how the private sector can provide this resilience. Government will do well to learn from this strength and remember to be humble on when to intervene. Food security does however remain vulnerable to the threat of other major natural events, for example microbial disease and the impact of climate change on agriculture particularly, e.g. to large flood plains.
>> Geopolitics – the world works better when it works together. However COVID-19 has highlighted that sovereignty matters, for supply chains particularly. There have to be rules, structures and, perhaps most importantly, responsible relationships for international collaboration and trade to function positively. Their scale means the USA and China – and the relationship between them – have major roles in setting the agenda for geopolitics. Other G7 members and multilateral groups such as the G20 and OECD are also key as nuclei for global collaboration.
>> People – while supply chains prompt a primary focus on products, supply chains are shaped and driven by people, through demand, supply, skills and leadership. Economies of skill have become very valuable to global trade and supply chains, and supply change fragmentation and inefficiencies must be tackled and avoided with expertise and goodwill. Geopolitics might suggest a trend towards nationalism, however young people around the world appear to still strongly aspire to globalisation and international cooperation. The Internet and social media have helped foster global connectivity, amongst younger people particularly. Younger people are also more attuned to the threat of climate change. There is a strong case for more dialogue and involvement with young people.
This was the first ‘In Conversation with Brennan & Partners’ event. The next will take place in June and focus on sustainability and innovation.