Impact of Covid-19 Pandemic on Global Supply Chains & Importance of SCM professionals

COVID-19 had been the buzzword for the past year starting from late 2019. The coronavirus had caused a major impact not just on our health and immunity system but had also caused us psychological and economical harms. 2020 had been a nightmare for the human race. Millions of lives lost to this highly contagious virus and we are still living in the shadows of the pandemic waiting for a vaccine that can allow us to time travel back to the pre-pandemic era.

None of us had seen this coming. This had evidently proved to be one of the most testing times of our present generation as we battle the ill-effects of the pandemic in our personal, professional, and social lives. And well, for supply chain professionals worldwide, COVID-19 has been a test of resilience.

The IMF estimates that the global economy shrunk by 4.4% in 2020. It described the decline as the worst since the Great Depression of the 1930s. - BBC

Almost all industries worldwide had been affected by the pandemic. We saw major economies experiencing negative growth during 2020. Major Superpowers like the U.S saw their GDP shrinking at an annual rate of 32.9% by July 2020. Many economies had fallen in the negative, which had been the worst since the Great Depression, which was the worst economic downturn in the history of the industrialized world, lasting from 1929 to 1939.

The impact of such heavy losses across industries and economies had evidently caused disruptions across global supply chains. 

Since the pandemic,  70% of supply chain decision-makers said that COVID-19 is creating the biggest impact on the supply chain currently, according to Jabil's Special Report: Supply Chain Resilience in a Post-Pandemic World

The supply shock that started in China by early 2020 and the demand shock that followed as the global economy shut down exposed vulnerabilities in the production strategies and supply chains of firms in every industry. This pandemic had inevitably proven the importance of a resilient supply chain. The major challenge for organizations across the globe will be to make their supply chains more resilient without weakening their competitiveness in the most cost-efficient manner. An analysis by a major research company points out the below stats:

                                                        Credits:  supplychaindigital.com

The major challenge for global manufacturers will be on managing their supply chain disruptions to cope with with the increased demand and to structure their supply chains in such a way that it has the capability to bounce back with an alternative plan that can match the production and distribution capacity with the spike in demand by minimizing the amount of inventory held in their global supply chains. Supply chains of major companies are so complex that it depends on suppliers spread across the globe to procure their products in the most efficient manner. The pandemic had forced many organizations to look into local suppliers in order to reduce the lead times and risks which exist when sourced across different countries or even continents. 

To manage such complex supply chains by incorporating resilience needs specialists who can forecast the demand with better accuracies, strategize and design supply chain models that are streamlined to meet the business needs and reduce operating costs, thus resulting in an improved financial position and increased customer satisfaction. The challenges posed by the pandemic had highlighted the need for qualified supply chain professionals with the right knowledge, education, skill-set, and passion to manage such a supercritical business function that can in turn add-on to the bottom line. Supply chain management had become an integral part of the business and is essential to any company’s success in the post-pandemic era.

Covid-19 crisis and the economic turmoil had boosted the importance of supply chain management professionals across the globe because it has the power to:

• Uncover and Address the Hidden Risks
• Identify the vulnerabilities of supply chains
• Manage the supply base efficiently
• Take critical inventory management decisions like whether to Hold intermediate inventory or safety stock.
• How to Take Advantage of Process Innovations & technology like Robotics & Automation, Continuous-flow manufacturing, Additive manufacturing, IoT, etc. 
• How to make Trade-Off Between Product Variety and Capacity Flexibility

More focus must be given to supply chain optimization to minimize costs, reduce inventories, and drive up asset utilization to incorporate buffers and flexibility to absorb disruptions─and COVID-19 illustrates that many companies are not fully aware of the vulnerability of their supply chain relationships to global shocks.

Building and managing a robust supply chain is the need of the hour. Organizations across the globe have to focus on improving supply chain visibility, manage risk vs cost, and focus on Resilience that can help build supply chains to effectively absorb the shocks of yet another global disruption like trade war, terrorism, regulatory change, labor dispute, sudden spikes in demand, or supplier bankruptcy in the future.

 Reference:

1. "Global Supply Chains in a Post-Pandemic World" - by Willy C. ShihHarvard Business Review, Oct 2020 Edition

2. "COVID-19: Operations and supply chain disruption" - by Kevin Keegan, pwc

3. "The Impact of the Coronavirus on the Global Supply Chain" - by Frank Mc Kay, Jabil Inc.

4. "COVID-19: Managing supply chain risk and disruption" - by Jim Kilpatrick, Deloitte Touche Tohmatsu India LLP

5. "Accenture: building supply chain resilience amidst COVID-19" - by Georgia Wilson, supplychaindigital.com

6. "The Great Lockdown: Worst Economic Downturn Since the Great Depression" - by By Gita Gopinath, IMFBlog.com, International Monetary Fund