Impact of COVID-19 on Global Supply Chain

Coronavirus is a black swan event that has disturbed the global economy and taken the lives of people across the world. The outbreak of COVID-19 has also disrupted the Global Supply Chain.

Consumers across the world are stockpiling essential items. A procurement team struggles to cope up with the COVID-19 global pandemic. Companies are trying to diligently to secure raw material and components and protect supply lines. Effect of supply chain disruption can be seen i.e. long stretches and empty supermarkets.

 In the era of globalization, industries have become more integrated and diversified. The structure of the Ripple effect can be seen in the global supply chain industry. As the dozens of countries, companies from raw material, Work in progress, and finished goods are involved to manufacture products.

 'Ripple effect' describes the propagation of amplified disruption in supply chains. It occurs when disruption in one part leads to the disruption in other parts which bogged down the whole supply chain.

 As many companies are dependent on faraway suppliers and lacking any alternatives, no part of the value chain and just-in-time industry can work unless all parts do.

 There is an unseen stoppage of production in China, and many other parts of the world led to the shortage that makes up the backstory of the impact. The supply chain is not just an operational issue anymore, but an important part of the strategy and business model innovation. 

 COVID-19 may prove to be the catalyst for the companies to revisit the global supply chain strategy and accelerate the adoption of Digital Supply Network models and capabilities. 

 According to the Institute for Supply Management survey, nearly 75% of companies are seeing capacity disruptions in their supply chains as a result of pandemic-related transportation restrictions.

 Over 60% of firms are experiencing delays in receiving orders from China, and 53% are having difficulty getting information from China.

 COVID 19 hampered the production of Automobiles across all the categories. As many automakers in India import about 10% of their raw material from China. Manufacturers are looking for alternatives to fulfill their supply chain demand.

China is a significant source of supply for many active pharmaceuticals ingredients. China was the epicenter of the pandemic outbreak factories and companies manufacturing these ingredients shut and China declined the export of it. But now some relaxations are made.

 Due to the shortage of manpower, shutting down of stores, reduction in an operational capacity, traditional distribution mechanism there was a disruption in the supply chain of the FMCG sector.

 Steps that can be taken to restructure supply chain model:

 ü Domestic industries should develop its local sourcing unit. They should also adopt alternative strategies for reducing the dependency on China.

 ü To restructure the supply chain model mindset shift is a prerequisite from operational thinking to strategic thinking. Many industries don't focus more on supply chains thinking that it's just an operational matter. It's not the operational matter anymore it becomes an important part of business model innovation and strategy.

Important thing learned from the pandemic outbreak we should consider risk management along with the quality and efficiency factor. Risk management refers to the ability to address both demand and supply uncertainties.

 A supply chain with Risk management is referred to as the "2R supply chain". It can respond quickly and accurately to the fast-changing customer needs and market demand and can recover quickly from the impact of external disasters. To make supply chain responsive and resilient there are five capability modules the company should focus on building i.e. Speed, collaboration, flexibility, visibility, contingency planning, and management.

 ü The flow of time of a supply chain can be improved by reducing the lead time of key processes or eliminating non-essential processes through integration and innovation.

ü Digitization is a key factor to increase value and moving towards sustainable growth.

ü There should be multi-scenario planning and real-time operational alignment. Which means there should be day zero and beyond planning. So, to prevent out of stock situations mainly in the case of grocery and essential products.