The After Effects COVID-19 Will Have on Global Supply Chain

Lately, the entire world has been brought to a halt due to the coronavirus outbreak. As social distancing has become the norm, people have stopped venturing out of their homes, and are opting for isolation instead. As there are no known cures for the coronavirus, the best thing for everyone to practice right now is to avoid contact with other people.

Aside from the major implications, this outbreak has caused to everyone’s personal lives, the world as we know it will no longer be the same once we get back to our normal routines. The COVID-19 impact can be seen very clearly in the global economy. This change in our daily routines will take a toll on stock prices, and may even cause irreversible damage to several businesses. The changes seen due to coronavirus and logistics companies trying to find their footing will be long-lasting unless we begin to act soon.


COVID-19 impact from the perspective of China

For any business to deliver its best, there needs to be a well-regulated and efficient supply chain. Once the supply chain is disrupted, businesses will not be able to gather key inputs for its production process, which will eventually leave these companies with empty shelves.

As of now, the entire world is looking at China to make some reparations for the current crisis. As China is a major source of components as well as finished goods, several manufacturers and retailers all over the world are facing the brunt of the disruption in the supply chain in a distinct way. As China went into lockdown, several plants across the country sat idle, which also meant that they were not able to deliver to the global pipeline of goods and components that was expected by retailers across the globe. The continued disruption in the supply chain will now only see retailers run out of key inputs needed to run their business, eventually forcing them to suspend their operations.

Aside from the components, China is also a huge market for several goods and services. The buying prowess of China has severely diminished, and other local economies across the globe are feeling the effects of the same. As the Chinese people have limited their consumption of goods and services, it has caused a massive change in business for several companies. Tourism, which was a major source of revenue for the country, will now be severely affected. In this line, tour operators, hotels, and even guides will lose out on their sources of income, all due to the COVID-19 impact on the country at large.

It is not just the current lack of operations that will impact the global supply chain. Even if there was a possibility for China to resume work at full scale, there would undoubtedly be changes to trading partners’ supply, which will affect the country as well as the rest of the world.


How the supply chain will be affected by COVID-19

The coronavirus crisis is not the first time that we got to see a disruption in the world economy as we know it today. When a massive earthquake hit Taiwan in 1999, there was a severe disruption in the country’s economy as a whole. Moreover, with Taiwan having major control over the export of memory chips in 1999, the rest of the world saw a serious incline in RAM prices due to the limitations that were caused to the production of memory chips for computer manufacturers. Yet another example of this global economic shift is the impact of the 2011 earthquake in Japan. The country, being a major producer of automotive parts, could not come to the rescue of several distraught automotive manufacturers.

Given the situation today, the first COVID-19 impact will most likely surface in the service industry. These businesses run based on the influx of people to the business. As the global movement of people has come to a standstill, these businesses will run into cash troubles, due to the lack of high customer volumes.

The major lesson that can be taken from this COVID-19 and supply chain crisis is how companies should focus on risk management rather than crisis management. The need of the hour is for companies to focus their energy on diversification. Companies should spread out their supply bases, and also bring out new measures that will make their supply chains more resilient in the future. As of 2020, several global manufacturers and retailers were already beginning to question their dependence on suppliers in China. Typically, manufacturers chase low labour costs, which may be the next plan of action for several companies once the crisis averts. Instead of opting to be based out of a country with inexpensive labour, manufacturers and retailers should focus on creating uncorrelated sources of supply. This way, a regional problem will not severely affect the entire business so very harshly.

As for now, the cases of COVID-19 are on the rise, even in places like Europe and America, with both of these continents becoming the epicenter for the highest number of affected people. Manufacturers and retailers around the globe should be prepared to take more hits in the coming days, as even the most knowledgeable economists are unable to figure out the accurate long-term effects of the pandemic. Right now, the efforts are to mitigate the further loss of lives and to build back a healthy and robust living for the people, after which efforts to strengthen the economy will slowly mobilize.



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