How COVID19 is Crippling the Global Supply Chain

While a lot of businesses and industries have been hit hard, the impact of Covid19 on Global Supply Chain has been particularly devastating. It’s had such a profound effect on the way the entire world operates, that everyone from the largest businesses to governments and retail stores is being affected. Even end consumers (namely, everyone in the world) have felt the effects, with a lot of items becoming more expensive and increasingly difficult to find at stores, or even online.

According to Danko Turic, an associate professor of operations and supply chain management at UC Riverside’s School of Business, we are witnessing “previously unseen disruptions in both supply and demand,” and he’s not wrong.

Since COVID19 began spreading, country after country started imposing lockdowns and acute restrictions on movement, especially across borders. In the early days of the global pandemic, this created many urgent situations and shortages that required immediate attention. Many companies have moved into a ‘recovery mode’ and are now planning for the futures of their businesses.

This has been a wake-up call for many to create more robust business plans to strengthen and their operations. The importance of efficient supply chain management, as well as improved risk management, has become more apparent than ever. Organizations need to look at ways of reducing supply chain waste and streamlining their operations.

Truth be told, COVID19 is just the latest in a long list of issues that have plagued global supply chains. 

  • The global balance of production and consumption has changed tremendously over just the last few decades, which in turn has altered shipping routes and traffic significantly.
  • Companies have been shifting their manufacturing and procurement to low-cost jurisdictions like China and some other parts of South-East Asia. This has led to them become increasingly dependent on smooth freight movement from these parts of the world.
  • Companies have been forced to rethink their entire supply chain models and many have even had to make multiple changes to their operations. Broad global developments have made reliability and stability a key consideration to tackle the uncertain future.
  • There have been a lot of disruptions, both local and global, to the way organizations operate and do business. Everything from the changes to logistics to reduced supply and even the contractual obligations to customers have evolved dramatically.

Companies now need to sit back and take stock of just about every aspect of their operations. This includes reviewing contractual obligations like force majeure clauses and being prepared by assessing tax implications, visa and other travel issues for employees, cost of relocation, and even exit strategies.

Your supply chain may need a lot of changes, but make sure you remain agile so you can deal with any new developments or revert to the old ways in case the situation begins to normalize.

Particular Impacts

The extent of the impact of Covid19 on Global Supply Chain is still revealing itself, but some of them are already noticeable and frankly, concerning. Supply and demand go hand-in-hand and there’s been a dramatic shift in consumer demands:

  • Shortages- Increased demand coupled with manufacturing constraints have led to shortages (products like sanitizers, paper products, etc.)
  • Rationing- Retailers are well aware of the demand crunch, with many rationing certain items
  • Prioritization- Many online retailers are giving items like medicines a higher priority
  • Reduced Product Breadth- Retailers are reducing the number of SKUs (breadth) and increasing the number of products (product depth) to fill shelves

Future of Supply Chain

Though there’s been a lot of mechanisation and automation in the last decade, one of the biggest challenges is still going to be managing your workforce. If you can’t offer a safe environment for workers, you’ll reduce morale. Workers might now show up or worse still, actually fall sick. Companies with labour-intensive processes, like crop harvesting, will need to take this very seriously.

We’re likely to see a lot of change between different companies, even if they’re in the same league right now. Some might face shortages that others won’t. This will likely be a result of some companies planning to deal with the uncertainty differently than others. While planning a supply chain in these uncertain times is expensive and difficult, it may be necessary for your business’ survival.

Author Bio:

Erich Lawson is passionate about saving the environment through effective recycling techniques and modern innovations. He works with Compactor Management Company and writes on a variety of topics related to recycling, including tips and advice on how balers, compactors and shredders can be used to reduce industrial waste. He loves helping businesses understand how to lower their monthly garbage bills and increase revenue from recycling.

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