Transit support from farm to market would have solved the problem to a great extent.
A demand-supply mismatch has been the obvious consequence of the government’s decision to put the country under lockdown amid the full-blown Covid-19 pandemic. The stay-at-home order is perhaps the best weapon to contain further spread of the coronavirus, but the government is responsible for ensuring unhindered supply of consumer products in the short run, and saving the market from gradual desiccation in the medium to the long run.
Despite the government’s repeated promises to keep the supply of essentials uninterrupted during the lockdown, this has not happened. Consumers, producers and distributors are finding it extremely difficult to conduct market-based transactions. This has caused disruptions to the supply chain of food and other essentials. Nepali food and agro producers continue to complain that they are not receiving adequate support from the government to take their products to market. The consumers, on the other hand, are experiencing an acute short supply of commodities ranging from food items, vegetables and dairy products to fruits, fuels and medicines.
In fact, the government utterly failed to institute any new logistic mechanism in view of the current Covid-19 crisis so as to keep market interactions among producers, sellers and consumers intact. Instead, it closed old markets like the Kalimati vegetable market to retail consumers, citing the gathering of crowds and ensuing risk, without providing any viable alternative arrangement. This has happened when the supply is already disrupted due to the closure of vehicular movement with the country and from across the border. It is the government’s responsibility to keep the market open in the interest of both producers and consumers by ensuring basic safety standards.
The government has also clearly failed to assuage buyers of vegetable, dairy, fruit and meat products. Whatever limited amount of these products is available in the market remains unsold for lack of confidence among buyers about their phyto-sanitation status. Transit support from farm to market, and a simple disinfection mechanism in the main markets for available products, would have solved the problem to a great extent. But the government remains mysteriously nonchalant.
What the government seems to have completely failed to recognise is that the post-lockdown scenario, however long it may be, will engender a new set of market challenges. Increased crowds in the market will not only add to the risk of further contagion, but also trigger dynamics in the supply chain. Shipments from India, mainly of food items, may still remain limited, and local stocks will gradually run out while the domestic production process remains severely disrupted.
The main vegetable harvest season is about to be over. Farmers need a substantive nudge and support to start a new cycle of production. Supply may be seriously impacted in urban and semi-urban areas where 42 percent of the people reside. The population in city areas prefers, and is habituated to consuming, commodities in finished form. This definitely calls for keeping a proper supply chain management in place. These supply-side constraints are becoming further exacerbated by labour shortages caused by restrictions on movement and the resultant scarcity of fertiliser and seeds.
Things to do
Consumption can be facilitated through enhanced e-commerce deliveries. This will not only compensate for and prevent the inherent pitfalls, but has the potential to avert traditional supply chains from going haywire. Nepal has started witnessing retailers initiating online sales of groceries. But it is very limited. There are only a few e-commerce platformsfor essential medicines and online doctor appointments. The validation and credibility of these critical health-related services remains a big question mark, and role of the government in expanding and accrediting these services is crucial. This may take time as we do not have the necessary digital infrastructure and supportive e-commerce platforms at the moment.
To avoid disruptions, one should come up with supply network mapping as a risk mitigation strategy. Though cost saving is an inherent objective in most procurement related activities, techniques aimed at cost containment require a thorough overhaul of the entire inventory management system. One can anticipate a drastic short-term reduction in demand from the hotel and tourism sectors. This will further affect the backward linkages that we generally witness in the feed industry, and to some extent, the forward linkages too. For example, we can expect a spike in the price of chicken in the short term as a consequence of destroying thousands of birds recently. The only way to salvage the poultry industry is for the government to pump in money.
Job losses in the unorganised sector are likely to be colossal, resulting in a drastic reduction in purchasing capacity and demand for commodities. While scarcities of goods would immediately result in a spurt in prices, demand may experience a deep decline in the long run. In addition to food items, demand for products such as clothes and durables like TVs and fridges may witness a sharp dip. But businesses can anticipate a sudden surge once the lockdown ends and normalcy is restored in people’s lives.
There must be a supply chain management national plan in place for the post-lockdown period, recognising the fact that both demand and supply trajectories will see new movements and patterns. Nepal is under-prepared, both in terms of expertise and infrastructure, to handle these sudden changes. For now, the market mechanism must focus on supply of daily essentials and medical services, and in the interim and long run, on transport, production and education services, among others.
This article was first published on The Kathmandu Post by Ms. Roshee Lamichhane. Ms. Lamichhane is an Assistant Professor of Marketing and Associate at the Enterprise and Management Development Programme at Kathmandu University. The views expressed in this article are those of the author and do not necessarily represent or reflect the views of this organization and should not be thought to represent official ideas, attitudes, or policies of any institution.