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Abstract
This paper investigates the Effects of COVID-19 on Support Activities in Porter’s Value Chain. The COVID-19 pandemic interrupted global economic activity, harming businesses and driving many of them into bankruptcy. In particular, we investigate how COVID-19 affects value chains in four support activities: firm infrastructure, technology development, human resource management, and procurement. Manufacturing companies can use the strategies outlined that we investigate to mitigate the impact of the COVID-19 outbreak and come back better in the future. We primarily focused our research on case study methodology and journal articles from numerous research papers focusing on the manufacturing industry and analysing the effects of COVID-19. This research adds to the manufacturing value chain studies in the area of COVID-19 pandemic by examining the efforts made by manufacturing companies to reduce the effects of the COVID-19 pandemic.
Keywords: value chain, COVID-19, manufacturing, support activities
Introduction
Coronavirus Disease (COVID-19) is an infectious disease caused by the SARS-CoV-2 virus. The most people affected by the disease will experience relatively mild respiratory issues and would recuperate without hospital treatment. Others, on the other hand, would be extremely sick and lead to more serious problems. The elderly as well as those with serious physical health conditions such as cardiovascular disease, diabetes, chronic lung disease, or cancer tend to be highly susceptible to serious illness. COVID-19 could indeed cause the person ill, keep making them terribly sick, or end up dying at any age (Coronavirus Disease (COVID-19)). COVID-19 also had an impact on the world economy, particularly in support activities in Porter's value chain.
The COVID-19 pandemic has indeed posed numerous obstacles to the worldwide manufacturing industry. According to a recent poll by the National Association of Manufacturers, nearly 80% of manufacturers predict the pandemic to have a substantial financial effect on the company, which is way greater than the 48% of cross-industry companies who had experienced the same effect (PWC, 2020). Moreover, COVID-19 has a negative impact on nearly 53% of the manufacturing industry (Zhu et al., 2020). It is quite clear that the companies are seeing their worst fears come true as a result of rising oil costs and demand, as well as rapid shifts in value chain constraints. To reduce the threat of the novel COVID-19 virus, many manufacturing enterprises recently halted their production facilities and most are considering the extent of redundancies. To commence with, the majority of manufacturing jobs are done on-site and cannot be done remotely. Besides that, the COVID-19 epidemic has delayed worldwide economic activities and lowered demand for industrial items (Choi et al., 2019) (Choi, 2020).
Additionally, the subsequent shutdown has forced production facilities to a complete halt, causing the worldwide supply chain to be disrupted. Manufacturing companies could anticipate weaker supply chain links, as it seems that several suppliers could suffer operational or financial difficulties (Ivanov, 2020) (Queiroz et al., 2020). Over than 75% of businesses have one or more direct tier-1 suppliers in China, and more than 938 Fortune 1000 corporations have direct tier-2 and tier-3 suppliers in China, all of whom will be negatively impacted by COVID-19 disruptions (PrensWire, 2020). These frightening circumstances have set off a chain of events that includes a sharp drop in worldwide inflows of foreign direct investments and a sharp drop in global economic activity. According to a recent United Nations Conference on Trade and Development report, the COVID-19 outbreak might lead worldwide foreign direct investment to drop by 15% as a result of the manufacturing industry's decline and the partial or complete closure of production facilities (PrensWire, 2020).
The spreading of outbreaks is thought to disrupt supply chains. They also pose a daunting task to supply chain management, which may be successfully comprehended through the three major components listed below (Ivanov et al., 2017). There is a sense of long-term, massive instability at first. Second, the transmitting supply chain will be disrupted, accompanied by an epidemic disease spreading throughout the community (Sawik, 2013). Last, pandemics disrupt large-scale networks, as well as demand and supply. The study of how epidemic diseases affect supply systems, particularly humanitarian logistics and supply chains, is not new (Lee et al., 2009) (Altay & Pal, 2014).
The impact of COVID-19 pandemic on firm infrastructure
The impact of COVID-19 pandemic on technology development
The COVID-19 outbreak has resulted in numerous uncertainties, forcing manufacturing industries to adopt the new normal and be well-prepared for future challenges and new opportunities. As the global value chain (GVC) is dynamic in nature which adjusts resources’ value, therefore flexibility in strategy is crucial (Zhou & Kim, 2021). Based on Kumar et al. (2020) point of view, the current pandemic is the ideal time for manufacturers to adopt and utilise the fourth industrial revolution (IR 4.0) and digital technologies in light of these consequences. IR 4.0 is where items, machines and employees are linked into a network via Internet of Things (IoT) technology, in which processes of production are managed in virtual space (Elavarasan & Pugazhendhi, 2020).
COVID-19 has disrupted supply chains globally including uncertainty in raw materials supply and failures of supply, weakening demand for textile and automobile products as well as reducing ability to ship and receive products in a timely manner because of logistics and shortages bottlenecks (Kumar et al., 2020). In dealing with such issues, manufacturing firms become more resilient and flexible when producing essential items. This is to ensure customer demand is met. Thus, artificial intelligence (AI) based manufacturing which produces granular COVID-19 maps would be an excellent option during the pandemic era, which indirectly promotes digital production (Kumar et al., 2020). In addition, PricewaterhouseCoopers (PwC) report highlighted that the manufacturing industry should proactively apply automation technologies including IoT, autonomous materials movement as well as collaborative robotics in order to improve the sustainability of workers in such industry.
Research by Zhou & Kim (2021) found that clothing and textile (C&T) companies used branding and new product strategies to cater the changing lifestyle of consumers through combining the concept of “smart clothing” and technology. This shows that companies place technology at the centre of their sustainability initiatives across the global C&T value chain. In terms of design and product development, sustainability may be enhanced via eco-friendly design, 3D printing as well as slow fashion. To aid the shopping journeys of consumers, C&T companies accelerate digital strategy and transformation by utilizing online platforms. Through adoption of wholesale digitization, buyers are welcomed to virtual showrooms where they can explore collections using interactive user interfaces and high-resolution images. Additionally, purchase orders can be completed online at the convenience of the buyer (Streets & M., 2020). However, taking into consideration the current situation, mergers and acquisitions may be worthwhile in strengthening companies’ digital agenda in order to avoid bankruptcy during this crisis.
According to Szozda (2017), the future business model will be dominated by information and communication technology (ICT). This is supported by Kumar et al. (2020) who recommended adoption of a robust information technology management system as one of the controls to handle the current pandemic. Such a system would help to share the consumption patterns besides real-time production. Research by Elavarasan & Pugazhendhi (2020) suggest that machine learning (ML) and supply chain technologies as another technological control strategies in dealing with COVID-19 pandemic. ML as a sub-domain of AI is being adopted to predict the outbreaks which help in numerous ways to tackle the pandemic. In short, AI, ML, IoT as well as robotics and drone technologies would get a boost to encounter the pandemic.
The impact of COVID-19 pandemic on human resource management
The outbreak of COVID-19 has affected the entire world, including Malaysia. It was a global pandemic that impacted lives, production, and normal business operation and raised constant worry among the staff. Over 100 000 employers lost their jobs due to the continuous spread of the deadly virus in 2020 (Ismail F. et al., 2020). Furthermore, ILO (2020) provided concrete evidence that the rate of employment had increased. Those organisations with inappropriate planning methods and policies on combating the virus laid off their workers to reduce their expenditure (Hasanat M. W. et al., 2020). Those stable firms attained new production methods by advising workers to work from home and setting up new technologies. Thus, the paper focuses on examining the positive and negative outcomes of the COVID-19 pandemic on Human Resource management.
The negative impacts include inadequacy of the number of workers on site. Business operations shut down, and other developed workers worked from home. Few workers were found at workplaces to execute daily duties because of the outbreak of the COVID-19 pandemic (Aitken-Fox E. et al., 2020). Workers had a choice between making themselves unavailable or joining the other team to work. According to Ratanasiripong P. et al., (2016) worker's attendance could not be projected, and absenteeism could occur in vital positions due to stress. The organisations had a duty of reducing the prevalence of the virus at the workplace. The strategies involved reducing overcrowding and making sure that the workers were safe.
Next is stress, weak motivation, and fate. Many workers had a high level of stress and anxiety during working at home. According to Shani A. & and Pizam A. (2009), stress at workplaces led to economic issues. The environment had changed, and there was no contact with colleagues. To add, Gilmour H. & Patten S. (2007) suggested that when employees are depressed the work performance is affected because of psychological disorders. They felt unmotivated because of that and inadequate communication. They experienced exhaustion with minimum help. The other one is erosion of "fit”. It was one of the COVID-19 impacts that affected HRM. Employees performance was affected by work and set in by depressions (Ivandic I. et al., 2017). It involved the adaptation of foreign environments by the workers. Mainly, there were adjustments to various employment surroundings, the introduction of new work methods, and the restriction of human communication. For instance, the introduction of virtual training and recruitment of workers. The changes impacted the usual operation of workers. Uneven work-family upshots are also another effect. COVID-19 overturned social family, work, and family. The findings by Yawalkar V. & Sonawane M. (2017), indicated that the relationship between the pandemic and work-life balance was poor. The changes drastically shifted work-life exposure. Employees were negatively affected.
The positive impacts consist of adaptability and swiftness. The pandemic brought many uncertainties and effects that led to economic changes. The HRM became more responsible, aggressive, and sensitive to this issue. They made their organisations adapt to the situation for continued production. There is an increase in experience of making successful and adjustable adaptations in various organisations by HR professionals.
The other is polishing of attention on the worth that HR produces.HR value of making employers stay safe, healthy, busy, lucrative, and stimulated was much considered by the organisation during the pandemic. The spread of the pandemic made individuals remain working from home. Thus, human resources practises like hiring, provision of training, recruitment of new workers, and provision of new skills remained to be online (Ismail F. 2021).
Technology adoption and digitalization was another effect. With the remote working of employees, the organisations were forced to implement new technologies for effective co-operation and easy distribution of tasks (Carnevale J. & Hatak I., 2020). Also, it reduced the working spaces in the offices as more workers were working from their homes. Hence, this made the organisation minimise construction and infrastructure installation costs.
Human resources facilitated redefining. HR plays a crucial role in redefining the workplace essence. Organisations developed confidence in remotely working employees because they were committed and determined to produce (Ismail F. 2021). Working from home ignited quicker decision-making and better performance for reduced staff. It also helped disabled individuals with skills to join the workforce. Furthermore, it helped workers control their careers and individual concerns.
The effects of COVID-19 are not well estimated if they are long-term or short-term. The uncertainties that were brought by the pandemic caused both negative and positive effects. For efficiency, production firms and staff were to adjust to suit these changes. Workers had to adopt new skills for smooth functioning. Employees focused on developing themselves. Firms adopted new strategies of business operation. HR should make the workers busy, stimulate, hold them and consider their viewpoints for easy problem-solving.
The impact of COVID-19 pandemic on procurement activity
Procurement is not limited to the process of acquiring materials or resources necessary to build products or services; it also encompasses activities such as adhering to service level agreements, resolving internal and external user inquiries, and sensitising internal users to the full functionality of its processes, value, contract management, and pricing structures (Kanyi, 2021). Based on research by Ivanov and Das (2020), in the field of supply management, governments throughout the globe have implemented complete or partial lockdowns, limiting vehicle mobility in order to stop the spread of the virus; as a result, suppliers' ability to deliver items on time to consumers has been significantly hampered. More importantly, in this COVID-19 pandemic, supplier interactions have been diminished, making it more difficult for businesses to build a collaborative strategy that incorporates all of the parties involved (Van Hoek, 2020). Earlier in the era pandemic, it is widely assumed that CEOs were completely unaware of the dangers of outsourcing to China and were facing a heavy financial burden (Handfield, R.B., Graham, G., & Burns, L., 2020).
In the procurement process, according to Gupta et al. (2020), opportunistic behaviour may also grow as a result of interruptions, and non-disrupted providers may demand higher prices of resources or materials if they believe that other suppliers have been harmed by the disruptions. Companies may experience severe interruptions in their inputs, which may result in a rise in their expenses and, therefore, an increase in their prices. Additionally, as demand grows and supply shortages emerge, it is normal for input prices to climb. The government's emergency request for certain goods such as face masks, protective gloves, ventilators, beds, medicines, intensive care material, COVID-19 tests, lab supplies, and hospital infrastructure has significantly increased in tandem with supply shortages, as evidenced by the dramatic increase in public procurement (OECD, 2020).
COVID-19 has changed items towards a higher risk profile in the supplier segmentation, according to Handfield, R.B., Graham, G., & Burns, L. (2020). There is a finding by van Hoek, R. (2020) shows that the pandemic is pushing companies to analyse entire costs holistically, in addition to the purchase price, the engagement with suppliers and discovering new sources of supply is becoming more important for mitigating supply chain risk. To add, Handfield et al. (2020) suggest a "segmented contingency" approach with suppliers, pointing to the Kraljic supplier segmentation that says to consider the risks and dependencies of your suppliers when companies manage them. Kraljic supplier segmentation has been hailed as one of the most effective techniques for procurement strategy development. Supply risk is one of the segmentation's two aspects, and it balances the influence of suppliers on costs with the hazards inherent in the supply chain. While an emphasis on competitive bidding and cost reduction is acceptable for leverage items (those with a significant influence on costs and little supply issues), the contrary is true for bottleneck products. These products and services contain significant supply risks, and the emphasis should be on securing supply rather than on negotiating pricing (Padhi, S.S., Wagner, S.M., & Aggarwal, V., 2012).
Procurement activity cannot happen if there is shortage of raw material. Research by van Hoek R (2020) indicates the diversification of suppliers across several sites is another piece of advice for supply chains to minimise production interruptions when a particular area is under lockdown.
Conclusion
References
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