COVID 19 The State Of Supply Chains (Part 1)

Introduction Grand disruption

Delayed shipments because of sea freight disruptions, monthly increasing fuel charges, disconnected communication between transport modalities.. These are all direct effects encountered across Supply Chains that resulted from the introduction of the virus COVID-19.

It is undeniable that COVID-19 has caused many disruptions across markets. Especially within the Supply Chain industry, the virus has caused some companies to go bankrupt due to their fragile Supply Chain not being able to counter the negative effects caused by the virus. This unforeseen situation, experienced by companies worldwide, has caused management staff to relook and revise their current Supply Chain strategies. What is the current state of Supply Chains? Are there any positive effects that come from the disruption within the industry? Which are the key learning factors to pay attention to? These questions are all covered concisely within this 2-part article.

Negative effects

In order to understand the current state of Supply Chains the negative effects incurred must be known. Many Supply Chains faced comparable negative issues because of COVID-19. Ernst & Young LLP (EY US) conducted a survey in late 2020 where they asked approximately 200 senior-level supply chain executives at organizations across many sectors, including consumer products, retail, life sciences, industrial products, automotive, and high-tech companies in the United States with over US$1b in revenues if they experienced positive/negative effects amongst their Supply Chains. Out of these respondents, a staggering 72% stated to have experienced negative or severe negative effects. 18% stated the pandemic had no effect on their company whilst a minor 11% actually stated to have experienced positive effects. See the chart below for a short visual overview of the respondents’ answers (Harapko, 2021).

Figure 1, Supply-Chain Effects experienced as a result of COVID-19 – 200 Respondents SE (https://www.ey.com/en_gl/supply-chain/how-covid-19-impacted-supply-chains-and-what-comes-next)

According to this research, many Supply Chains were hit hard by the pandemic. Some companies experienced more negative effects than others. This research stated that, among the respondents, all automotive and nearly all (97%) industrial products companies said the pandemic has had a negative effect on them. Furthermore, 47% of all companies reported the pandemic disrupted their workforce.  These are significant amounts and clearly visualize the struggle experienced by many companies in their later stages.

Confusion, a lack of understanding.

The specific negative effects faced by Supply Chains are too many to go into detail. Supplier retraction, fuel charge increases, significant demand increases, modality issues etc., to name a few. Especially in the early stages of the COVID-19, not many organizations understood the virus. It’s nature and the effects on short/long term future were very difficult to predict. As a result, the impact of the negative effects stated accumulated rapidly. It was difficult to implement direct countermeasures as nobody understood precisely how the virus would develop in the future.

According to Greenstone (n.d.), this confusion and lack of understanding resulted in cross-border flows of goods being stalled due to safety precautions needing to be understood and then implemented. Furthermore, local ‘lockdown’ regulations formed a great obstacle that needed to be understood in relation to trade. It was only after this that the natural flow-of-goods could continue to work on operating levels. This phenomenon can be easily identified within food Supply Chains. However, as mentioned before, the negative effects faced by Supply Chains can be seen across all industries. 94% of the Fortune 1000 companies claim to see Supply Chain disruptions because of the coronavirus. 

Figure 2 COVID-19 Supply Chain effects – Fortune 1000 companies (https://www.google.com/url?sa=i&url=https%3A%2F%2Fsupplychaindigital.com%2Fsupply-chain-2%2Faccenture-building-supply-chain-resilience-amidst-covid-19&psig=AOvVaw1cleCCNUnB1vy8TfDrQvHx&ust=16388950

The main conclusion that can be given from the experienced negative effects is that the many companies lacked a certain amount of resilience within their Supply Chain structure.

On the upside, COVID-19 has magnified and identified the present issues within current/former Supply Chain Structures and operations. Now that these issues have been identified, companies can use this knowledge to adjust accordingly for the better and gain a strong competitive advantage as a result. Would you like to know more about the state of Supply Chains moving forward? Stay tuned for our next Blog where we will go more in-depth or talk to a ModusLink Expert today by clicking here!.

Bibliography:

BizClik Media. (2020, May 17). Accenture: building supply chain resilience amidst COVID-19. Supply Chain Digital. Retrieved November 27, 2021, from https://supplychaindigital.com/supply-chain-2/accenture-building-supply-chain-resilience-amidst-covid-19

COVID-19: Managing supply chain risk and disruption. (2021, October 5). Deloitte. Retrieved November 26, 2021, from https://www2.deloitte.com/global/en/pages/risk/cyber-strategic-risk/articles/covid-19-managing-supply-chain-risk-and-disruption.html

G. (n.d.). What impact has COVID-19 had on supply chains & responsible sourcing? Greenstone. Retrieved November 26, 2021, from https://www.greenstoneplus.com/blog/what-impact-has-covid-19-had-on-supply-chains-responsible-sourcing

Gilkey, J. G. (2021, May 1). The challenges and realities of retailing in a COVID-19 world. Researchgate. Retrieved November 28, 2021, from https://www.researchgate.net/publication/351656064_The_challenges_and_realities_of_retailing_in_a_COVID-19_world_Identifying_trending_and_Vital_During_Crisis_keywords_during_Covid-19_using_Machine_Learning_Austria_as_a_case_study

Harapko, S. H. (2021, February 18). supply-chain. Ey.Com. Retrieved November 26, 2021, from https://www.ey.com/en_gl/supply-chain/how-covid-19-impacted-supply-chains-and-what-comes-next

Meyer, A. (n.d.). The Impact of the Coronavirus Pandemic on Supply Chains and Their Sustainability: A Text Mining Approach. Frontiers. Retrieved November 26, 2021, from https://www.frontiersin.org/articles/10.3389/frsus.2021.631182/full

Netherlands, S. (2021, July 27). COVID-19 impact on supply chains. Statistics Netherlands. Retrieved November 25, 2021, from https://www.cbs.nl/en-gb/dossier/coronavirus-crisis-cbs-figures/covid-19-impact-on-supply-chains