The world will remember the COVID 19 pandemic for myriad reasons. We know that everything is going to be remarkably different than what it used to be, once the pandemic subsides. A year ago, we all started with calling it a “new-normal”. But this new normal continues to evolve and everyday, there is a new learning. For both – people and businesses alike. With the announcement of lockdowns in public interest, consumers had started panic buying, stocking every resource they could get their hands on, and all things essential. With the onset of 2021, as demand started recovering, companies began working on building stronger buffer stocks. Why and how is it impacting the global supply chain? This is the aspect we’ll be looking at in this blog.
Current Global Supply Chain Scenario
Fresh challenges are arriving at the forefront when from cars to clothing, everywhere a shortage of materials is resurfacing. We don’t remember a time when transportation roadblocks, high prices, supply shortages were at such dramatic levels. Rising demand doesn’t surprise us as everyone believes that this crisis is going to continue and they must have their stocks ready for any supply shock to come.
“We’ve had some of the most difficult supply-chain challenges that we’ve ever experienced in the life of Tesla”.
Not just the story of Tesla, this remark follows the shortage of semiconductor chips worldwide that has shook the automotive industry, wreaking havoc on tech and automotive firms. According to Bloomberg, the chip shortage could easily cost car companies to lose as much as $61 billion in revenue. Moreover, the semiconductor crunch is not a momentous one. It is significantly threatening the electronics industry on a wider scale. It could even start to adversely impact the high-performing export economies across Asia. Latest headlines report that the crisis has reached a ‘danger-zone’.
“It’s not simply the result of a few temporary glitches. They’re quite structural in nature, and they affect a whole range of industries, not just automobile production.”
Vincent Tsui of Gavekal Research
Semiconductor chips are just one case in point but not the only one. Every day the sources are reporting shortage of chicken, ketchup, copper, iron, steel, lumber, coffee, and the list is only growing.
(Suggested Read: Problems in International Trade: What to watch out for in 2021?)
Unprecedented Event & Unprecedented Recovery
A year back, the coronavirus crisis, rightly acknowledged as ‘unprecedented’ pushed global supply chains into the most uncomfortable environment. Today, the recovery of demand, again unprecedented, is further disrupting the global supply chain. But how do businesses navigate through this?
The year 2020 exposed the vulnerabilities across the global supply chain and the year 2021 needs to be about filling the cracks that have been exposed. Supply chain resilience, digitalization, and collaboration – experts are talking about all possible opportunities. In the end, trying to work on a model that promises value to all stakeholders. This is a daunting task and there could be ‘unprecedented’ results.
COVID 19, not the only crisis that rocked Global Supply Chains
This is where things started getting worse. Just recently, the Egyptian President has given a green signal to the Suez Canal expansion project. A channel that carries over 12 percent of global trade was blocked by Ever Given owing to bad weather. And we know what happened next. Drought destroyed agricultural crops in various parts of the world, seriously affecting food supplies. The agricultural heartland, San Joaquin Valley, was gripped again in another season of droughts. The Texas winter freeze and mass blackout wiped out energy and petrochemicals operations across the central U.S., hitting businesses very hard and forcing them to remain shut for more than a week. For the first time since 2014, gasoline prices were over $3 a gallon in the US as their largest fuel pipeline was brought down by hackers. Now, the second wave of COVID 19 in India is threatening its largest ports. Every event is adding up to the global supply chain crisis. But this is what we’ve got and we got to run with it.
(Suggested Read: Why now is the time to increase Supply Chain Resilience?)
Learnings from the pandemic for Global Supply Chain Management
95% of business leaders said their companies have experienced disruption to strategic sourcing and supplier management processes during the pandemic.
Survey by Harvard Business Review Analytics Services
Every crisis presents an opportunity to learn and unlearn. We can observe that experts are putting great emphasis on a few aspects regarding the global supply chain in a post-pandemic world.
“Digitising supplier data is a top priority in 2021.“
Harvard Business Review Analytics survey
Making data easily accessible across multiple systems in the business is more important than ever. Business intelligence and data intelligence can help companies strategize better and prepare for the way forward.
At Trademo, we provide accurate, verified, and credible global trade data, sourced from official sources.
Diversifying your sources and bringing more transparency across the value chain is something that will help businesses identify potential risks as well as opportunities. No more, can companies afford to put all their eggs in one basket!
Further, it’s time to design a smart inventory strategy – one that can go against the norms at times. What proved beneficial in 2020 might not work in 2021.
Overall, experts are suggesting that prioritizing supply chain management is now an integral part of your business strategy. Previously, it had not received the attention it deserved but the recent events have inspired enough confidence in the need of supply chain diversification and management.