From manufacturing to retail, Singapore firms brace for supply issues amid COVID-19 outbreak
SINGAPORE: Singapore firms are bracing for possible supply disruptions as factories and shops in some parts of China remain closed amid the outbreak of COVID-19.
Even those that resumed operations this week are unsure when they will operate at full capacity, these local firms told CNA citing updates from their Chinese business partners, as workers who travelled back to their hometowns for Chinese New Year have not been able to return given city lockdowns and travel restrictions.
Already, the extended shutdown of businesses until at least Feb 9 in most Chinese cities, put in place by authorities to control the spread of the deadly novel coronavirus, has caused some supply chain disruptions.
Citing conversations with some local firms, Enterprise Singapore’s chairman Peter Ong said at a press conference last week that it has been “very difficult” to ship goods in and out of China.
Certain sectors are seeing a bigger hit. For example, those in logistics have seen a fall as much as 70 per cent in business due to transport challenges in China, according to Enterprise Singapore’s CEO Png Cheong Boon.
The semiconductor industry could also be affected, some analysts have said, as Hubei province – the centre of the virus outbreak – is one of China’s major manufacturing hubs in steel, automobile and electronics. Businesses there have been told to stay shut until Feb 13.
Citing a quick survey it did among 40 members, the Singapore Semiconductor Industry Association (SSIA) told CNA that 80 per cent of those that responded have seen impact from the virus outbreak.
The majority reported staff deployment issues and a drop in China-related business, while about one-fifth cited concerns about supply shortage or delivery delays from Chinese suppliers.
While most of the respondents agreed that it is too early to assess the full impact on their businesses, the COVID-19 outbreak will most likely slow down growth and derail an expected recovery in the industry this year, said SSIA’s executive director Ang Wee Seng.
“The question is to what degree. We will need to closely monitor this in coming weeks,” said Mr Ang.
Elsewhere in the manufacturing sector, local contract manufacturing firm Watson EP Industries said its factory in Dongguan has re-opened on Feb 10. But only slightly more than half of its 350 workers are back at work.
“Some of them are in the lockdown cities, some are still on the way and need a few more days,” said group executive director Joyce Seow.
The company said its current stockpile can last for at least two months. “I think we are fine for immediate orders but beyond that, we are still checking with our suppliers to see if they started work and whether their own supply chains are impacted,” she added.
Apart from uncertainties as to when supplies can be delivered, the firm is also anticipating logistics issues amid the manpower shortage.
If the situation is prolonged, it may consider shifting some production back to Singapore, said Ms Seow.
Across other industries, Horme Hardware said some of its shipments from China have been delayed.
The hardware tools and equipment retailer sources for goods from several Chinese provinces, such as Guangdong, Zhejiang and Fujian, and receives about 10 containers of goods each month.
As of this week, only some of the company’s suppliers resumed operations.
Its director Chan Hwa Hong said: "We’ve received confirmation from five factories that shipments, which were scheduled to receive by early March, will be delayed till the end of the month. Another three factories remain uncontactable."
As for local fashion retailer Charles & Keith Group, about 90 per cent of its production is based in China with its manufacturing facilities mainly located in Guangdong.
“We are in discussions with the factories we work with and we have been informed that they hope to progressively resume operations from next week,” said a company spokesperson.
The company added that it “has some factories in Malaysia as well”, and has sufficient stock for now.
“We hope that any disruption to our supply chain is temporary,” the spokesperson told CNA.
Singapore is bracing itself for a hit on the economy amid the ongoing spread of the novel coronavirus that is now named as COVID-19.
Beyond tourism-related sectors, some economists have cautioned about impact on the local manufacturing sector.
“China is also Singapore’s largest non-oil domestic export market, accounting for 17.3 per cent of the total share in 2019,” DBS senior economist Irvin Seah said in a note dated Feb 7.
“Supply chain disruptions such as extended factory closures within China, will have significant impact on Singapore’s manufacturing sector,” he wrote.
READ: Measures to help firms affected by COVID-19 must recognise differences from SARS: Chan Chun Sing
Trade and Industry Minister Chan Chun Sing, who spoke to reporters on Friday after a meeting with business representatives, said he is aware of these concerns among manufacturers. But he also said the virus outbreak has “brought home the importance of diversification” as part of strengthening supply chains.
For local furniture manufacturer Koda, this seems to be the case as a diversification into other markets has brought down its reliance on materials from China.
Only about 10 per cent of its supply chain is affected at the moment, even with its suppliers in Southern China still closed.
Mr Ernie Koh, Koda’s executive director of marketing, said while the company is concerned, that is still much lower compared to about three years ago when China accounted for as much as 40 per cent of its supply chain.
Horme Hardware’s Mr Chan said he has plans to seek alternative sources, but he is worried that his options may be limited.
“It’s not as straight forward because the other countries aren’t producing some of these items anymore or they are simply don't have the competitive edge."
As for local building materials supplier M Metal, it started turning to Taiwan for its supplies of steel coils since 2018. Those made in China may be cheaper, but bubbling uncertainties due to the US-China trade war prompted it to make the switch.
As such, the company has not been affected by any of the ongoing disruptions. "Contractors that have signed contracts with us will see no disruption to their ongoing contracts," said managing director John Kong.
Still, Mr Kong said the company is not without concerns.
“(The situation in China) will have a great impact on the buying behaviour for these buyers with no forward contracts with steel mill – they have to quickly look for an alternative and reliable source of supply,” he told CNA.
“In the short term the steel mill cannot quickly increases their capacity ... So what the steel mill will do? The mill will increase their steel prices as demand is greater than supply.”