The Impact of Covid-19 on Global & Local Supply Chains
The coronavirus pandemic has become a “black swan” event. Its presence has shaken things up globally across all industries, particularly the global freight field, resulting in significant impacts to the world economy. The pandemic has exposed the vulnerabilities of numerous companies, especially those that rely on global supply chains, as well as international trade.
The pandemic has revealed how much the world is interdependent and interconnected. The restrictions put in place to limit movement affected supply chains, trade, and national and local economies. When you look closely at the ecosystem of the product supply chain, it begins from the gathering and assembly of raw materials and continues all the way through to production and transportation to the end-consumer. This long process has been affected at each stage by the pandemic.
Covid’s effects on the global supply chain
Some safety rules have affected the global supply chain ecosystem. These include:
- The lockdown and closure of borders by various countries have caused a decrease in the supply of raw materials to manufacturers who require them for the production of goods.
- The transportation restrictions that were enacted slowed the delivery times of products and resulted in numerous empty containers on the docks. And now, after the lifting of these restrictions, we are experiencing increased pressure to transport by air, road, and rail.
- There also has been a shift in consumer demand. This change was evident when Covid-19 was declared a pandemic. We saw a lot of people binge shopping for essential products in large quantities. This move reduced the number of people who visited stores in the weeks that followed.
The changes in the supply chain that we have observed in the past couple of months also have affected and shaped market trends. For instance:
1) Enhanced digitalization
There has been an increased use of online systems such as the Electronic Terminal Information System (ETIS), which allows customers to book their freight transportation online. Lineas, a company from Belgium, has adopted this process to keep operating in these pandemic times.
Also, some organizations have quickly adapted during the pandemic, for example, Cold Air Central, which restructured so customers can get what they order in a timely fashion.
2) Increased use of freight trains
The U.K. has introduced rail freight to transport essential supplies such as food and medical consumables across the country. Trains that ferry groups between China and Europe also increased, from 15% to 18%.
3) Increased use of e-commerce
People staying at home and not moving around much has enhanced the e-commerce sector. Companies that never used to have websites quickly set them up to allow consumers to have access to the goods they required. A study conducted by ACI Worldwide on global online transactions reported a 209% increase in e-transactions among sellers and buyers in April alone as the pandemic set in. Additionally, to minimize disease transmission, there also was a rise in non-contact deliveries.
4) Reshoring of manufacturers
Manufacturers also saw a need to cut their long supply chains. A good example is Germany and France teaming up to establish an electric-car battery company to be based in Europe to minimize sourcing of batteries from Asia.
5) Enhanced use of technology
Before the pandemic, there was minimal use of technology. However, to enhance operations and visibility, we have seen an increased use of tech tools such as artificial intelligence, the Internet of Things, virtual reality, and robotics. Such technology also has automated supply chains significantly.
There is no doubt that the coronavirus pandemic has affected global supply chains immensely. The pandemic has caused people to change their views and revamp their supply systems so they are more robust, adaptable, and accommodating to current demands. With all these changes, it is critical to note that global trade also plays a role in the flow of goods across regions and people.
Even as we shift our focus to new ways of doing things, the approaches that have been adopted will have to be revised after all this is over. Review your methods to ensure that your current approaches are agile, sustainable, and use technology to streamline your supply chain process.
Rebeca Miller is a marketing manager with an interest in global trade and supply chains. Contact her at firstname.lastname@example.org.
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