How The Covid-19 Pandemic Changed The Supply Chain Industry

by | Jul 2, 2021

5 min read

In February 2020, when the pandemic hit the world in full swing, the global economy took an inevitable jolt.

As transport came to a halt and offices shut down, millions of people were forced to work from home. As a result, travel took a backseat, and the world entered a phase of severe economic meltdown.

With depreciating stock market value across the globe, in March 2020, the UN trade agency UNCTAD forecasted that Covid-19 was likely to cost the economy $1 trillion in 2020 alone.

The world financial crisis worsened as supply chain disruptions from China kept growing, along with uncertainty in global oil prices. When the pandemic hit, the world bank had predicted that the global economy would shrink by 5.2%. These numbers represent the deepest recession plunge since World War II.

Amidst these economic shocks, the logistics and supply chain interruptions experienced during the pandemic have compelled supply chain industries to reassess their transport networks and manufacturing strategies.

Adding to that, according to HBR, the U.S.-China trade war has triggered a wave of domestic production amongst manufacturers to keep up with growing supply chain demands.

The pandemic has ultimately exposed the vulnerability of our supply chain system and raised questions about globalization. Hence, the current challenge – to make our supply chain systems more robust while reducing the probability of failure due to risks.

But first, here’s a list of obvious supply chain risks associated with the pandemic to help you predict bottlenecks and take proactive steps to avoid losses.

Identify pandemic-related risks to build a resilient supply chain

 

1. Lockdowns disrupt factory operations

Shutdowns lead to supply chain delays and sometimes disrupt one full product lifecycle. If procuring raw materials and hardware through freight or cargo is delayed, the setback snowballs further, leading to delays in releasing the product into the market. These delays affect sales, and product lifecycle time increases, leading to losses.

Solution: Resort to sustainable manufacturing solutions like lean manufacturing to avoid supply chain bottlenecks ahead of delivery deadlines.

2. Public health concerns slow down supply chain activity

More than one year into the pandemic, the deadly health hazards virus mutations can cause are only worsening day by day. Working with masks, PVC suits, and other extra equipment makes it even harder for factory workers to perform their daily activities. These additional steps lower efficiency. When coupled with frequent lockdowns, production slows down, leading to substantial financial liabilities.

Solution: Systemize production to adapt to current working conditions and use tracking data to increase efficiency in operations. Divide multi-tier supply chains to establish a list of critical components, determine the origin of supply, and identify alternative sources to keep the system transparent and easy to access in case of a bottleneck.

3. Labor shortage causes freight and cargo service disruptions

Due to a lack of staff, picking up cargo containers was delayed in many ports in China. This led to freight terminal congestion and cargo bottlenecks.

Solution: Use predictive analysis and logistics intelligence to give you ample time to plan the pickup ahead of possible congestions. Logistics Intelligence helps estimate existing inventory across the value chain to keep production running and enable delivery to customers.

4. Low demand and empty runs lead to losses

During the peak of the pandemic, on a major Asia-to-northern Europe route, an estimated 46% of ship departures were canceled over four weeks in February 2020.

Another estimate suggests that more container ship tonnage was lying idle than during the 2008 global financial crisis.

By March, there were several cases of empty runs reported by shipping companies. In addition, shipowners canceled several pre-planned stops due to low demand.

5. Supply-demand imbalance leads to an increase in raw material prices

As of March 23, more than 20 airlines suspended their operations by 100 percent, implying all flights were canceled. On average, 25,000 flights were canceled per week worldwide.

When the flights and cargo suspension rate of global airlines went up, freight capacities exceeded. As a result, due to limited freight capacities and increasing delivery demands, raw material prices have gone up, eventually leading to an increase in commodity pricing.

Devise a complete overview of your supply chain system to make it more resilient

As a supply chain company, operating without an outlook of the processes and systems is one of the biggest reasons businesses fail to identify leaks in their revenue.

Most supply chain companies do not have access to real-time logistics data from their third-party suppliers.

They haven’t figured out the next step in case of a logistics failure or supply chain discrepancy due to unprecedented reasons.

In short, tracking the flow of goods gives you control and power to make the right next move.

Here’s how.

What if you could see and compare the total shipping charges and refunds you’ve received in the past 12 months, on one screen, at the same time?

Within a matter of seconds, you would know the exact amount of audit savings last month, and you would have access to your net spend without having to tackle hundreds of spreadsheets and scour millions of rows. You would know the exact number of packages being shipped without having to go through piles of paperwork. You would have access to numbers that tell you the exact average shipment cost in the last 30 days. With a distribution overview summary, you can keep track of receiver locations, real-time.

Not just that, being able to view the numbers to assess quarterly savings for different package services helps you see if your current carrier is helping you save money or not.

When you have a clear picture of what’s happening in your supply chain business, you’re equipped to make business choices that lead you towards profits and less data backlog. Need help setting up a logistics intelligence system that lets you digitize your supply chain operations? We’ll help you take proactive steps to optimize your supply chain operations. Request a free demo here.

Topics: COVID-19, Supply Chain Operations
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