FACULTY OF BUSINESS MANAGEMENT

UNIVERSITI TEKNOLOGI MARA

KAMPUS PUNCAK ALAM

BACHELOR OF BUSINESS ADMINISTRATION (HONS.) TRANSPORT

SUPPLY CHAIN MANAGEMENT

(TPT550)

ASSIGNMENT:
PAIR ASSIGNMENT: PERSONAL SUPPLY CHAIN

PREPARED BY:

NAME ID NUMBER

NURSHAZLINA LYDIA BINTI ROSSLY 2019335943

AISHAH ASMIRA BINTI AIZON 2019348003

GROUP:
BA2474A

SUBMITTED TO:

DR. MOHD HAFIZ BIN ZULFAKAR

TABLE OF CONTENT:

CONTENTS PAGE NUMBER

1.0 INTRODUCTION 1–2

2.0 ECONOMIC SECTOR THAT ARE AFFECTED BY

COVID-19
i) AVIATION INDUSTRY 3–4

ii) MANUFACTURING INDUSTRY 5–6

3.0 WAYS TO ADAPT AND MITIGATE THE

PROBLEM
i) AVIATION INDUSTRY 7–8

ii) MANUFACTURING INDUSTRY 9-10

4.0 REFERENCES 11

i
1.0 Background scenario of Covid19 pandemic in general and economic perspectives

The COVID-19 pandemic is a global 2019 coronavirus disease pandemic which is

caused by severe acute respiratory syndrome coronavirus 2 through coughing and sneezing.
This outbreak was initially detected in mid-December 2019 in the city of Wuhan, Hubei
Province, China, and was recognized as a pandemic by the World Health Organization (WHO)
on 11 March 2020. There is currently no vaccine to treat this disease but preventive measures
have been recommended such as washing hands, closing the mouth when coughing,
maintaining distance from others and performing 14 days of monitoring and isolation for people
who suspect they are infected. When news of COVID-19 transmission in China began to
spread in early January, the initial expectation was that this pandemic is only temporary and
a large part of the global economy will be safe. Most revision of growth projections globally in
the early stages was well below one percentage point. Since then, the situation has changed
dramatically.

The government has mobilized resources for the healthcare sector and implemented
strict restraint measures such as travel restrictions, business movements and activities to curb
this epidemic. Apart from losing lives as a result of the COVID-19 pandemic, the source of
individual income was also significantly affected. This containment is necessary, but the losses
that have to be borne are quite high with the global economy now expected to experience a
severe recession by 2020. This economic crisis has certainly begun due to productivity
constraints. The Movement Control Order has been implemented by the government to ensure
that people are at home all the time except when buying basic necessities and always
practicing social distancing. This situation has caused economic activity to stop abruptly and
at the same time affect the global supply chain. In addition, it also triggered a bad and
widespread demand for response due to reduced production has caused businesses and
households to incur substantial income losses. Growth will be modest if production constraints
or prices do not change and growth will recover when the constraint expires or is reduced by
policy intervention. Production and prices tend to move in that direction opposite.

Next, demand. This problem happens due to changes in terms of demand such as
economic uncertainty, risk aversion and changes in levels of robust domestic or export
spending. Inflation and growth often move in the same direction due to the demand shock
crises. Lastly, the financial crisis. Financial crisis is like a demand-driven crisis, except the
degree of seriousness and the period of recession are usually greater due to the procyclicality
of the financial sector. Failure to repay the mortgage which is getting increased in a state of
slow household income growth and willingness to take increasing risks has resulted in the
price of risky assets being reassessed. Besides, growth becomes more weakened

1
accompanied by an increase in excessive debt repayment especially among banks, which
results in a credit crunch. In this situation, procyclical financial sector frictions have increased
economic recession on a global scale and at the same time it has a detrimental effect on
demand.

Malaysian economy contracted by 17.1 percent in the second quarter of 2020, a

double-digit decline for the worst quarter since 1998 following the implementation of an
unexpected control order to curb the spread of COVID-19 and see the economy barely
moving. Malaysia implemented the Movement Control Order (MCO) on March 18, 2020 which
saw the economy operate at a capacity of 45 percent. Then, it was followed by the Conditional
Movement Control Order (CMCO) on May 4 and then the Restoration Movement Control Order
(RMCO) on 10 June-31 August 2020 which led to the gradual reopening of the economy.
Central Bank of Malaysia has revised its Gross Domestic Product (GDP) growth forecast by
2020 which shows an increase of -3.4 to -5.5 percent from -2 to 0.5 per cent previously
following the initial estimate based on a four-week MCO period compared to seven weeks.
The economy is also expected to recover and record growth of 5.5 percent to 8 per cent by
2021.

2
2.0 Explain at least two (2) economic sectors that are most affected by the Covid-19
pandemic lockdown and how its supply chain operations are disrupted

i. Aviation Industry

The aviation industry is among the worst affected during the COVID-19 pandemic, when
the majority of countries around the world implement curfews and at the same time closing
the exit of the country. In line with sentiment and the significant initial shock due to the
pandemic is expected to lead to a decline in credit quality as well as uncertainty that further
increases existing risks and burdens the sector involved. Last September, the Air Transport
Action Group (ATAG) predicted that about 4.8 million airline employees and half of the 87.7
million jobs related to the aviation sector were threatened by this crisis. The same thing is felt
in Malaysia when two giant airlines in the country, Malaysia Airlines Berhad (MAS) and AirAsia
Berhad face the risk of bankruptcy if no injection of funds is given to them. It would be very
challenging for any airline to continue business without substantial financial support from their
respective governments for the purpose of avoiding liquidity crises, both in companies and
industries. They also predict that the future of the aviation industry will continue to be bleak
over the next 12 months. Covid-19 provides lasting effects and airlines need to adapt wisely
to the changes that are taking place. Rapid recovery in a short time is impossible due to the
severe economic impact as a result of outbound and inbound controls, travel bans and mass
assembly bans. Keep in mind that not all countries can recover at the same time.

All the aircraft that were once fully utilized, which only stopped for an hour at the airport
before departing again, are now stranded in storage. Assets worth hundreds of millions of
ringgits each will only give a return if they are free to fly back and forth. On the other hand, the
owner must bear the various costs of storage, handling and management while waiting for the
airspace to reopen. Since the transmission of the corona virus was declared a global
pandemic, more than 60 percent or almost 16,000 passenger planes had to be 'rested' as
there was no need to operate carrying passengers. As long as it is not used, the aircraft should
not be left stranded because it must be ready to be activated if the world recovers from the
pandemic. The main factor is finding safe parking storage and maintenance facilities which
involve hydraulic systems so as not to freeze. Air humidity also needs to be controlled as it is
capable of damaging wiring, instruments, interior decoration and possibly rust. Apart from that,
the oil tank should be filled to a minimum as the aircraft is exposed to the effects of wind
blowing if it is too light, and for lubrication purposes

3
 Revenue in the Malaysian aviation sector is expected to decline to US $ 4.6 billion
(RM19 billion) this year, following various restrictions imposed to curb the transmission of
COVID-19. More worryingly, the International Air Transport Association (IATA) also expects
about 250,000 workers in the aviation sector, including from related sectors such as tourism
to be at risk of losing their jobs if international air travel restrictions are extended. The Covid-
19 pandemic has hit the aviation sector not only in Malaysia but around the world with an
estimated loss of US $ 84.3 billion (RM350 billion). In the second quarter ended June 30,
2020, AirAsia recorded a net loss of RM992.89 million, while its revenue plunged 96 percent
to RM118.96 million. Malaysia Airlines Bhd also faces financial constraints that encourage
them to implement various measures such as salary cuts and unpaid leave for its employees.
Malaysia needs to find a way to start international travel safely, including through the
implementation of the travel bubble.

Lastly, following the Covid-19 pandemic, the Malaysian Aviation Commission

(MAVCOM) has revised its forecast for Malaysian passenger traffic which resulted from a
growth of between 4.6 per cent and 5.7 per cent, to a decline of between 36.2 percent and
38.1 percent year-on-year. It means that passenger traffic projections are between RM67.7
million and RM69.7 million in 2020, a significant decrease compared to the total number of
passengers of RM109.2 million in 2019. This is due to the cancellation of flights by Malaysian
and foreign airlines of 14.0 million seats (for the period between January and December 2020).
This is an addition to a 15 percent reduction in seating for domestic routes and 20 percent for
international routes. Malaysian airlines have reduced seat capacity by 2020 in response to low
air travel demand and travel restrictions imposed by countries around the world. In line with
the drastic decline in demand, aviation industry operators are now having difficulty in
maintaining their financial status. Although the Malaysian government allowed flight
operations to be opened for domestic travel, their profits did not increase sharply as
passengers still had fears and worried about the spread of this virus

4
 ii. Manufacturing Industry

Regarding the lockdown during COVID-19 pandemic, we found that the manufacturing
sector is one of the most affected sectors in Malaysia. There are many supply chains
challenges when the lockdowns are implemented around the world. There are many studies
stating that the manufacturing sector shows the steep fall during the lockdown. As we know,
the manufacturing industry needs to have the raw material to produce the product. Some
companies use global supply chains to get their material or input that rely from international
suppliers such as from China because this country is known as the world factory. It will affect
the production process and the company will not be capable of fulfilling the customer demand
regarding raw material disruption. Unfortunately, during the lockdown, the production got
problems regarding sudden shortage of material and the demand of the product sharply
decreased but depends on types of the product. The interruption of shortage of material will
lead to loss of productivity in the company. This happened because the production will run by
using the raw material that is only left until the company gets their material from their supplies.
For example, companies that involve electronic components. If a few components are not
enough, it will affect the production process.

During the Movement Control Order in Malaysia, only companies that produce critical
products will be able to operate during lockdown and the rest will be temporarily shut down.
Our country is a manufacturing country in which we are made and the largest supplier for
panel solar. Before this pandemic, Malaysia will be a destination for direct foreign investment
in the production area and investors are welcoming to invest in our manufacturing industry
which can increase our economic growth. The implementation of the lockdown, our country is
losing their investor that wants to invest here and it also affected the job opportunity that was
given from the investment. The sector accounts for 22.3 percent of the RM1.4 trillion GDP of
the country, and losses are expected to be RM12.9 bill from just the first 14 days of the MCO.
Other than that, the shortage of workers is also one of the problems in the supply chain. It is
because some companies used foreign workers or contact workers to be their workforce so
when lockdown, the workers are not able to work. Most of them will return to their hometown
because if staying here, it will be difficult and challenging for them to survive. The operations
are temporarily stopped which mean the worker needs to stay at home.

Even though the company can operate during lockdown, they will not maximize the
use of their workers because the new work procedure will be implemented by following the
SOPs that the government has stated. The organization needs to explain and create
awareness about the virus and the need to adjust the position worker in the production area.
As part of material handling procedures, they need disinfection to ensure protection and the

5
safety of the worker while working in the production is safe. Therefore, the reduction of usage
of workers during the lockdown needs to be organized very well by the organization. The
manager will make every week's schedule for the worker that can come to work, and it will be
rotated. Some companies even lay-off the workers because the demand of the product is
lower and affects the company revenue.

Lastly, we will explain the delivery of the product during lockdown. The issue is about
the movement of the cargo to deliver the product to their customer. When supply chain
disruption occurs in the process, it also will involve unpredictable or unscheduled delivery of
product to the customer to fulfill the demand. It is because of the restriction of movement
during this situation. There are many procedures that the company needs to do to cross the
border of each region in our country. The other reason is the availability of the product is not
able to be fulfilled. Therefore, the product may be will not fulfill on time. This will make the
customer dissatisfied with the service that company gives. The company needs to incur the
loss of the revenue during the short time of lockdown and will raise the prices due to fewer
firms providing freight transportation.

6
3.0 Discuss how the parties within the supply chain of these two affected economic
sectors adapted and mitigated the problems and challenges associated with this
pandemic

i. Aviation Industry

The COVID-19 pandemic that has affected the global economy with the risk of a
recession could provide an opportunity for Malaysia to restructure its aviation industry and
make a profit. Malaysia must immediately provide support to all its airlines, in order to maintain
its employment, relations and role as a hub. Leaving the airline buried and rebuilding it from
below after Covid-19 subsided is a difficult option that costs a lot of money. If the Covid-19
outbreak lasts for a long time, airlines need to think of ways to continue the business and one
of them through mergers. In this way, airlines can share fixed costs which are said to be
relatively high compared to operating costs in the aviation sector. Companies need to think
beyond the scope of their firm and what the next steps need to be done. Even with the merger,
the shareholding will be less, but they have to accept it to avoid their company having to close.
Next, the merger step is also to see how the two airlines can leverage their respective
resources. They are able to move the flight network effectively and at the same time reduce
the government burden to save the company. Malaysian Tourism and Travel Agents (Matta)
described the aviation industry as the foundation of the tourism ecosystem, while air relations
are an important aspect of the country's economic recovery and tourism. He added that the
aviation industry was the first in the long-term supply chain of the tourism industry including
airports, roads, trains, accommodation, food and beverages, entertainment, business,
shopping, education, and health.

Besides, the government plays an important role to help the aviation industry by
providing financial assistance for training purposes to former aviation staff who were forcibly
terminated in order to shrink the operations of their company. A committee will be set up to
review the initiative involving several ministries and agencies including Human Resource
Development Berhad (HRDF), the Social Security Organization (SOCSO) and the National
Entrepreneur Group Economic Fund (TEKUN Nasional). A total of RM50 million will be
channeled to the aviation industry through the Ministry of Finance (MOF). A Memorandum of
Understanding (MoU) also will been signed to assure those who have lost their jobs at the
airline given training and supplied with financial assistance. These funds are actually able to
ease their burden because they have lost their source of income to support themselves and
their families due to the pandemic of COVID-19.

7
 One way for the company itself to ensure that their services run as usual are by offering
cargo services to reduce the impact of the Covid-19 crisis. Local airlines will be transporting
cargo instead of passengers temporarily when the country's aviation industry seeks to mitigate
the effects of the Covid-19 crisis which saw a decline in passenger numbers following travel
restrictions and health checks. To avoid any aircraft being left on the runway without
generating any income, local airlines will pick up cargo, including light cargo that can be carried
in the cabin. Low aircraft fuel prices and rising air cargo rates due to declining cargo capacity
in the aviation sector have enabled the use of passenger aircraft as cargo-specific aircraft. For
example, in early May 2020, Malaysia Airlines used an Airbus A380 to transport 36 tones
between Kuala Lumpur and London. A total of 400 (passenger-to-cargo) P2C flights were
operated at the end of May. This trend should be explored further as airlines find it difficult to
survive by relying solely on passengers, which can be an opportunity to grow in this sector.

Lastly, Malaysia Airport Holding Bhd take an action by provide some reduction of the rental
of the premise, charges of parking and landing on the airport. The reducing rental could be
the loss to the Malaysia Airport Holding Bhd because their revenue come from this airport
around 30% for non-aeronautical revenue. Next, the government also give temporary
deferment of the monthly income tax payments for business in tourism sector which mean the
airline company will get his incentives. This incentive actually good because the demand of
the passenger and tourist to use the flight is lesser now and their revenue also fall.

8
 ii. Manufacturing Industry

During pandemic Covid-19, there are a few ways for the company to reduce the burden
that they are facing throughout this crisis. It is quite challenging because the loss of revenue
and demand of the product can be hard for companies to maintain their operation. The
manufacturing company needs to overcome or adapt the new solution for the businesses still
able to operate. It can be how to manage the process of being disruptive during the lockdown,
the action that needs to be taken and many more. As we know, the manufacturing sector
needs to have a good planning to produce the goods and operate the company smoothly. All
the components and the raw material must be in order to fulfill the customer's demand. The
company needs to have a good supplier that is reliable to supply the input according to the
company needs and wants. It is because the supply chain partner may be facing the other
challenges within their company and not able to fulfill the demand to supply. Some producers
have seen declining demand and others are growing, moving, or relocating capacity to satisfy
demand or develop new goods.

Therefore, the manufacturing company should reschedule and adjust the operation of
the process because it will not be the same as before the pandemic happened. It changes in
many ways that need the company to take action for the risk and irregularities activities. This
action is to create transparency of information with the supplier partner to identify the substitute
sources for production and operation in the company. Firstly, the company should make a
meeting with the supplier partner to share the information regarding the most important
material that their company needs and determine if the material needed is reliable to get or
not. List out all the crucial components or material that the company needs to operate the
company. If the material is hard to get from their existing supplier such as at a high-risk
location, the company needs to start to find another supplier that is able to supply the material
which is called alternative sources and the location of the supplier is important because it will
help, and ease making decisions and identify those material needs.

Regarding the time of delivery is not sufficient and unpredictable. The solution for this
situation is the manufacturing company needs to find a supplier that is capable of supplying
components and material on time. The delay of delivery of the material will make the
production unable to operate. It shows that the location of suppliers also can affect the
efficiency of the company to produce because it can involve the movement of the material in
delivery on time when the company is needed. The companies that use components from
abroad will have difficulty because the current outbreak is causing difficulties for the movement
of goods as well as having a policy that is different from the policy in domestics. Other than

9
that, it is easier to get a local supplier who can provide the same components to become a
new partner.

Next, the optimizing of production capacity in order to protect and ensure the safety of
the worker that handles the production area which involves sourcing and working with crisis-
communication departments to connect clearly with workers about infection-risk problems.
Providing outfitting factory workers in suitable PPE would also raise costs and probably
decrease the hand movement needed to assemble small parts, slowing down lines if
manufacturing in electronics and components. In order to prepare how to take advantage of
the available capacity, effective organizational preparation will determine which goods have
the greater comparative advantage, taking into account the importance for health and human
wellbeing and the opportunity for profits, both today and during future recovery. The
temporarily closed of the operation during lockdown, it gave impact to financial and
organizational based on the capacity available.

Lastly, we are reaching industry 4.0 in manufacturing which uses digital technology
and makes the production more efficient. This is also one of the ways to adapt the challenges
that the manufacturing sector is facing right now. Before this, I had explained about the usage
of foreign workers in the production which give the company handicapped because of the
shortages of workers. The manufacturing company can use more machinery and digital
technology to reduce the usage of workers that need to come to work. It will help to sustain
stable distancing as development activities that continue by a simple touch and location tracing
smartphone software

10
4.0 REFERENCES

1. Cennimo, D. J. (2020, December 09). What is COVID-19? Retrieved December 12,

2020, from https://www.medscape.com/answers/2500114-197401/what-is-covid-19

2. Oodles, E. (2019, July 31). Supply Chain Management in the Aviation Industry.
Retrieved December 13, 2020, from https://medium.com/@aditi.dutt/supply-chain-
management-in-the-aviation-industry-f7829ac29348

3. Sheikh Yahya, S. (n.d.). The impact of COVID-19 on Malaysia's airline industry.

Retrieved December 13, 2020, from https://www.astroawani.com/berita-malaysia/the-
impact-of-covid19-on-malaysias-airline-industry-264574

4. Tackling Supply Chain Disruption During COVID-19. (2020, May). Retrieved

December 13, 2020, from IndustryWeek website:
https://www.industryweek.com/supply-chain/article/21132223/tackling-supply-chain-
disruption-during-covid19

5. Supply Chain Disruption » potential causes and impacts | riskmethods. (2020, May 28).
Retrieved December 13, 2020, from Riskmethods.net website:
https://www.riskmethods.net/resilient-enterprise/supply-chain-disruption

6. The Star Online. (2020, April 26). Impact of Covid-19 on manufacturers. Retrieved
December 14, 2020, from The Star Online website:
https://www.thestar.com.my/business/business-news/2020/04/27/impact-of-covid-19-
on-manufacturers

7. Tam, M., & Cheah, B. (2020, November 06). Budget 2021: RM50mil allocated for
retraining of airline employees. Retrieved December 12, 2020, from
https://www.thestar.com.my/news/nation/2020/11/06/budget-2021-rm50mil-allocated-
for-retraining-of-airline-employees

8. Augustin, S. (2020, May 28). Airlines turn from passengers to cargo as travel industry
reels. Retrieved December 13, 2020, from
https://www.freemalaysiatoday.com/category/nation/2020/05/28/airlines-turn-from-
passengers-to-cargo-as-travel-industry-reels/

9. Mayank Agrawal, Karel Eloot, Matteo Mancini, & Alpesh Patel. (2020, July 29). Industry
4.0: Reimagining manufacturing operations after COVID-19. Retrieved December 14,
2020, from McKinsey & Company website: https://www.mckinsey.com/business-
functions/operations/our-insights/industry-40-reimagining-manufacturing-operations-
after-covid-19

10. Knut Alicke, Azcue, X., & Barriball, E. (2020, March 18). Supply-chain recovery in
coronavirus times—plan for now and the future. Retrieved December 14, 2020, from
McKinsey & Company website: https://www.mckinsey.com/business-
functions/operations/our-insights/supply-chain-recovery-in-coronavirus-times-plan-
for-now-and-the-future

11