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COVID-19 Pandemic: Disruption in global supply chain network and the way forward

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Dhara Jhala, Ahmedabad: The coronavirus pandemic has forced the majority of the nations to go under a lockdown thereby disrupting the global supply chain network. It is the first such root-to-branch shutdown that countries have witnessed post World War II that has brought the entire world to a standstill. Due to the lockdown, assembling and logistics in all sectors from perishable items to essential commodities and from textile to mining have been hit hard.

While the ripple effects of this lockdown are still unknown, it is expected to bring a radical change in the way the world manages its supply chain network. The pandemic has also forced nations to think more about self-sufficiency for the various needs of the country rather than depending upon other countries for fulfilling domestic demand. The lockdown has also crippled public and private transport and factories downed their shutter that has considerably reduced oil demands resulting in a massive fall in crude prices.

The global supply chain consists of a dynamic worldwide network of companies involved in the production, packaging, handling, and distribution of goods and services to the end-users. This chain comprises of various stakeholders such as manufacturers, raw material and parts suppliers, transporter or logistics partners, distributors, wholesalers, and retailers who fulfill the end-users demand for goods and services.

In the present situation, this chain is severely affected and is feared to be on the verge of collapse. Due to the lockdown, nations across the globe are struggling to manage their inventories of essential goods for the consumption of citizens. Farmers are forced to destroy their crops or sell the produce at a far lower price as due to the disruption of the supply chain network, they cannot take it to the markets.

Unfortunately, despite the stringent measures adopted by countries worldwide, the coronavirus cases are rising rapidly and so are the deaths. Close to 30 lakh people have been already infected by the deadly virus, with over 2 lakh people succumbing to COVID-19. Developed countries such as the US, France, Italy, the UK, and the rest of the western world have already raised several warnings for the dwindling global economy. The full impact of the virus is still unknown, but the global supply chain network has been hit the hardest. With no manufacturing of non-essential items and hardly any import-export movement taking place in the world amid the lockdown, it hints at a bigger fiscal issue in store for many developing and developed nations.

The virus that originated in Wuhan in the Hubei province of China has already affected manufacturers all across the globe and one of the primary reasons is the world’s dependence on China. As per a US business intelligence firm Dun and Bradstreet, over 51,000 companies have one or more direct suppliers in Wuhan. In another report published by Deloitte, 200 of the fortune 500 companies have a presence in Wuhan.

Mobile handset major Apple was the first to announce that it will not be able to meet its first-quarter revenue plans due to a delay in the Chinese assembly plants. The current situation has proved that across sectors ranging from technology, pharmaceuticals, automotive, electronics to medical supplies and consumer goods, nearly all supply chains lead back to China as the provider of raw materials and components.

Another major reason for the global supply chain getting disturbed is the cut-throat competition in the world market and the piling of inventories in excess of short-term demands, which is not considered cost-effective. This has been also supported by an efficient logistics networks regulated by the global shipping industry and supported by modern technologies.

A behavioural change has been noticed in the buying patterns in all the affected countries—consumers have resorted to panic buying. Till date, the world is still under the grip of the COVID-19 pandemic and there is no vaccine for the viral infection so far. As there is no clarity on how long this situation is going to continue, people under panic have hoarded goods available in the market resulting in their shortage.

The world is known to have emerged out of similar crises in the past and surely, this pandemic will be also over one day. The fight against COVID-19 is also going to shape the future of globalisation. Limiting the dependency on one country, and greater reliability on advanced technologies such as blockchain, artificial intelligence, automation, 3D printing, and cloud computing are some of the ways for the world to remain better prepared for an unprecedented crisis of the modern world.

(Dhara Jhala is a professor of international business and research, Ahmedabad. Views are personal.)

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