The American Business Council-AmCham Kuwait (ABCK) hosted a webinar with Gulf Agency Company Kuwait (GAC) titled: “COVID 19, a Stress Test for The Supply Chain”. Over 50 people tuned into the webinar which focused on Covid-19’s impact on Kuwait’s Supply Chain on Thursday, May 28. The webinar was presented by Mr. Filip Björklund, Managing Director of Gulf Agency Company (GAC) Kuwait.
In his opening remarks, Mr. Björklund thanked ABCK for the opportunity to share his knowledge with ABCK members, greeted all attendees and began the presentation by explaining in depth Standard Trade Theory which suggests that countries should produce the goods in which they have a comparative advantage, and then trade with other countries. He then highlighted the history of trade.
“About 60 years ago we started with air movements when the commercial aircrafts started to expand and it’s now the mode which carried the highest value of the goods. But most of the cargo by ton-kilometers, 72% overall, is transported by sea. The international trade got supercharged about 60 years ago when the containerization reduced the cost to transport cargo by sea,” explained Björklund.
Björklund then proceeded to discuss the various elements of the supply chain, the network to the end consumer. The main three components are materials and products, information and documents, and finance and payment.
“These three need to function together, otherwise the supply chain will break in one part or another,” said Björklund. He then discussed various costs involved within the supply chain, from physical costs such as production, transportation, and inventory storage cost, to market costs such as lost business due to lack of stock, and price markdowns when inventory exceeds demand.
Following that, Björklund discussed in depth the recent global impacts of Covid-19 on each of the three components of the supply chain. Notably, he highlighted how cargo operations continued to function normally in many ports, however, governments and port authorities introduced safety regulations and restrictions to the movement of ships crews, truck drivers and other people accessing port facilities.
On the other hand, COVID19 resulted in an equipment/container imbalance, when containers could not be returned to Asia from Europe, the containers were not available where they are needed. Airfreight capacity decreased by 28% and rates have increased; COVID 19 surcharges were implemented by airport handling companies. With the introduction and use of Electronic Air Waybills (eAWB) by all other GCC states, Kuwait has an excellent opportunity to implement eAWB to improve its processes to be more efficient and release air cargo on a timely manner.
He also discussed how COVID19 has resulted in delays of processing of documents, payments, and cash flow issues resulting from closures of port locations and banks.
He then offered insight on the parallels between the COVID19 crisis and the Financial Crisis in 2007 -2008 which led to changes in Banking practices and Stress Tests. He stressed how crisis is the “mother of all change” and explained changes and best practices needed to prepare and adapt to a post-COVID19 world and future extreme events.
After that, Björklund examined the specific impacts of the COVID19 crisis on Kuwait’s supply chain, discussing in depth various key challenges such as production issues, blank sailings, port congestion, reduced transport fleet, reduced Ministry approvals and testing. In discussing finance and payments, Björklund highlighted how “banks closed their branches as Kuwait is using cheques quite a lot, and cheques can’t be cashed we are seeing a cash-flow issue in the country.”
Following that, Björklund shared some resources and information for further reading on supply chain management and challenges. He then concluded the session by opening the floor to Q&A in which he engaged the attendees in an insightful discussion and offered further clarification regarding concepts discussed throughout the webinar.
ABCK- AmCham Kuwait is a non-profit organization comprised of American corporations, small and medium sized companies, and prominent business leaders and entrepreneurs, both American and Kuwaiti. Since 1985, the American Business Council of Kuwait Ltd. (ABCK) has acted as an advocate for American companies in the State of Kuwait.