Corona Virus and Global Supply Chain

Since the first case was recorded in China, coronavirus has now spread around the world. The pandemic, COVID 19, as named by World Health Organisation has created havoc all over the world impacting livelihoods, businesses, industries, agriculture, financial sector, and whatnot.  Almost one-third of the human population is under lockdown which ascertains the severity of the disease.

As per the recent statement by the United Nations, The global economy could sink by up to 1 percent in 2020 due to the COVID19 pandemic. As per Moody’s Investors Service, the global spread of novel (COVID-19) will significantly slow economic growth. This, in turn, will have an impact on several key free movement driven sectors. For example, passenger airlines, shipping,  lodging which includes cruise lines and restaurants. Global logistics companies like Boeing and others that transport cargo is under extreme financial stress thereby causing repercussions in global supply ecosystems. 

As the pandemic epicenter shifts towards Europe and America, the effects of this dreaded virus began to multiply. Large volumes of manufacturers are facing supply problems, logistics issues. The network which became increasingly dependent on China is facing the wrath of the covid19 crisis.

This COVID19 crisis at unprecedented scale and speed are disrupting global supply chains and international trade. More than 100 countries have closed their national borders in the last one month, the movement of people, materials, and tourism flows have come to a sudden and harsh halt. The crisis has caused closures of business and factory outlets, thereby stopping global manufacturing and supply networks. Industries dealing with electronics, the auto sector, medicals, and supplies, consumer deliverables have seen a significant impact. On the other hand, Demands of essentials items like masks, sanitizers, Hydroxychloroquine, ventilators, etc surged with companies including GM and Tesla among the manufacturers working on ventilators to deal with shortages.

Since the exports- imports of finished goods and economic activities have come to a standstill, there is little hope for the manufacturing industries to carry on with their production. Countries are witnessing a drop in internal-external demand, a drop in domestic and external demand, trimming of trade, the turmoil of production. Global industries are under pressure because of the over-dependence on the international supply chain. 

Besides taking an enormous toll on human health, the pandemic has disrupted the global supply chain mechanism. Developing countries that are dependent on tourism (like Small Island Developing States) and commodity exports are facing heightened economic risks. Besides, the Middle east oil-exporting countries are facing the additional shock of plummeting oil prices. 

The severity of the pandemic will depend on how much time the economic activities are restricted in present conditions of lockdown. It will also be depending on how fast, actively, and prudently countries devise measures to deal with the COVID19 crisis. The pandemic has created immense pressure at all sectors of the economy and society including the government and the corporate sector. Initiatives by the Governments will set the base for the revival of economies

The crisis has shown the countries the delicate side of the supply chain network. The COVID 19 pandemic has reminded corporates and businesses that there is a need to develop resilient business strategies in future supply chains that can work in extraordinary crisis-like situations. Also, predictive models of supply chain networks need to be designed while considering the external uncertainties. 

 Governments are rolling out large stimulus packages to prevent a sharp downturn of their economies. For example, the USA has announced 2tn$ stimulus deal to fight this coronavirus and revive the much-affected sectors. Hence, in this period of emergency, Government collaboration is much needed. It is important to analyze the economic impact of the pandemic on supply chain networks to help companies in addressing short term challenges while keeping a check on longer goals.