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How COVID-19 Has Shifted Business Models in Asia

Each subsegment of the wholesale distribution industry has reacted differently to the market pressures of COVID-19, as discussed in my last blog post:

The pharmaceutical and healthcare subsegment played a pivotal role at the beginning of the pandemic due to increased demand for personal protective equipment, and continue to be vital to distribute coronavirus treatment-related medication.

The food distribution subsegment has felt some of the most disruption.  As a primary customer of this subsegment, the restaurant industry was forced to close or cut service thereby slashing order volumes and revenue.

The industrial segment felt softening demand, overstocks, and site closings to curb the virus from spreading.  As industrial projects pick back up in the coming months, these distributors may steadily return to normal volumes.

The high tech segment felt the work-from-home boom, as the workforce quickly shifted to working from home and the need for infrastructure to support the shift.

Within this blog post, I will outline how several wholesale distributors are using technology to avoid supply and demand disruptions across each subsegment while keeping their employees safe and healthy.

Pharmaceutical Subsegment

SAP’s Magnus Meier shared with Industrial Distribution that early in the pandemic, the pharmaceutical supply chain saw orders surge, especially in acute and retail settings. This surge occurred because of increased patient volume, insurers allowing for prescriptions to be refilled early and for extended periods, and the healthcare systems’ execution of business continuity plans. As demand spiked, however, the pandemic greatly affected manufacturing hubs such as China and India.

During the COVID-19 pandemic, SAP Intelligent RPA helped a pharmaceutical distributor create the speed and accuracy needed to process a huge number of orders. Automated ordering allowed them to continuously meet the growing and quickly shifting needs of their customers without delay or significant human intervention.

Food Distribution Subsegment

With restaurants, schools, and hospitals demand turned on its head, this subsegment experienced the most immediate disruption to their day-to-day lives and business management processes.

With growing demand and lack of supply, a leading Market Expansion Services provider with a focus on Asia has partnered with a pharmaceutical company to sell and distribute the company’s generic formulations from various therapeutic areas across medical and pharmacy channels in Singapore and Thailand.

Additional disruptions for this subsegment include:

  1. Food distributors had to quickly move to distribute food to industries that the government deemed nonessential.
  2. Food distributors were also seen moving to B2C business while the B2B sector had slowed down. It enabled them to connect to the end consumer directly. Some converted their warehouses into a cash-and-carry model.
  3. Food distributors had to engage in more Master Service Agreements with food suppliers, backed by the government, to supply food to vendors serving the worker’s dormitories which contained 90% of the COVID cases in Singapore.

Here is another example of innovation within the fresh food distribution subsegment.  With profits slashed by half during the circuit breaker period when many activities around the country were restricted, a vegetable wholesaler in Singapore knew that it had to rethink its business model to cater to a new normal. After spending more than 20 years selling produce to restaurants and catering companies, the vegetable wholesaler decided to reach out to consumers directly, even investing S$60,000 in packaging and equipment to facilitate the change.

Lastly, a Thai grocery wholesaler is pivoting to delivery services as the coronavirus pandemic continues. The distribution subsidiary has set up an online grocery store for essential items during the country’s lockdown period, with some of the firm’s delivery truck fleet converted into mobile grocery stores.

Apart from the economic impact, this pandemic has also exposed a very high social impact on humankind.

Sociological Impact on Asia

The overall stresses of the pandemic — financial, emotional, and physical — are forcing some people to take a hard look at their partners. Tensions are high, and there is nowhere to go.

The truth is, it’s already established that spending more time together in close quarters can increase the chance of divorce. In China, Bloomberg reported a divorce spike in March after couples emerged from weeks of strict lockdowns aimed to stop the spread of COVID-19. The city of Xian, in central China, and Dazhou, in Sichuan province, both experienced, “record-high numbers of divorce filings in early March, leading to long backlogs at government offices.” In the Miluo City Hunan province, some staff members didn’t “even have time to drink water” because so many couples were waiting in line to file for divorce, according to a state media report in March.

Better and Stronger – Together

The economic and sociological impact of COVID-19 on the world has been unlike anything we have ever experienced.  One thing remains true throughout the pandemic – wholesale distributors who thrive are using technology to maintain business continuity and remain agile in the face of disruption, while keeping employees safe and healthy.

My prediction is that this too shall pass, but not without further disruption and transformation.  We stand to come out stronger and smarter than we were before – and more united than ever.

 

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