By lowering costs and enticing companies to expand into other markets, the global supply chain aids in increasing the productivity and profitability of manufacturers and industries. Global supply chain management is to maintain the seamless operation of the global networks of producers, suppliers, warehouses, transportation firms, distributors, and retailers.
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Mitigating the risks associated with relying on suppliers and other partners whose operations are across the globe and who are subject to various governmental norms and regulations is a crucial component of that objective for business managers. The effect of a pandemic on global supply chains was one risk that few businesses calculated.
According to a research released in November 2020 by the U.S. Cybersecurity and Infrastructure Security Agency (CISA), COVID-19 has caused the following interruptions to the global supply chain:
According to a survey of 450 executives from various industries, 62% of businesses reported supply chain disruptions that affected 20% to 80% of total volume.
When asked which supply chain weaknesses the epidemic had exposed, 46% of the executives mentioned reliance on dubious partners or governments.
How Do You Manage a Global Supply Chain?
Over the past several decades, globalisation has been a dominant trend in almost every industry as manufacturers and other companies aim to benefit from the plentiful raw materials and low-cost manufacturing accessible in developing nations worldwide. The sophisticated networks of manufacturing, logistics, transportation, and communication companies that transfer goods and materials across international production and distribution routes are known as global supply chains.
The process of assuring the safe and prompt delivery of everything from raw materials to finished consumer goods as they move from producers and suppliers to wholesalers, retailers, and other distribution locations is known as global supply chain management. Cost savings, efficiency gains, and risk reduction are the three main objectives of supply chain management.
Why Supply Chains Are Crucial and How They Operate
Supply chains are the webs of connections between companies as they make goods and transport them to clients, be they consumers or other companies. According to Investopedia, both domestic and international supply chains involve a wide range of activities, organisations, and resources:
Before and During the COVID-19 Outbreak: Worldwide Supply Channels
Long before the COVID-19 epidemic, businesses and industries understood the important necessity of supply chain management to the global economy. Despite this, many enterprises across industries continued to rely on a single source for the provision of essential goods and resources. According to the law firm Foley & Lardner, the widespread use of just-in-time (JIT) production models that limit inventory in an effort to cut costs also left businesses more susceptible to potential supply chain disruptions.
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According to the findings of a CEO poll by Foley published in September 2020, firms have already started to place less importance on cost savings in favour of enhancing their resilience and lowering their reliance on production or sourcing from China:
Why Businesses Place Growing Value on Global Supply Networks
Numerous regions and businesses have benefited greatly from the globalisation that opened supply chains to all nations. During World War II, the trend towards open international markets advanced gradually, but recent political changes combined with pandemic pressure have caused established supply chain ties across nations, continents, and political systems to be disrupted.
Particularly high-tech enterprises depend on raw materials that are mostly obtainable through international partners. According to an article in Foreign Policy, U.S. technology companies are stepping up their search for more accessible supplies of the rare earth elements required to make the high-tech machinery that powers the computer, electronics, and defence industries. Currently, China and other foreign nations are the primary suppliers of these essential raw commodities to the United States.
global issues with supply chains Because of the Pandemic Companies now rely on a single supplier or manufacturer for all of their resource requirements, from raw materials to completed goods, as a result of their concentration on cost savings in their global supply chain management strategy. Manufacturers might save money by acquiring all the parts required for assembling a product from a single source.
The movement of people and goods around the world has never been disrupted by a tragedy with the width and scale of the COVID-19 pandemic, despite the fact that natural disasters, harsh weather, and other occurrences have in the past had an impact on the global supply chain. Four global supply chain difficulties are cited by Supply & Demand Chain Executive as the reasons why the pandemic’s effects on international trade are so severe:
Geographic scope: COVID-19 has affected the entire world’s population in a way that no other natural calamity has.
The impact of COVID-19 is felt directly by all markets and industries, in contrast to how most disasters and other disruptions affect a small number of sectors directly and others indirectly.
Demand shame: As individuals with large disposable incomes opt to postpone or cancel planned purchases of luxury goods, demand for high-end goods has dried up.
Even terrible natural disasters like the earthquakes and tsunamis that hit Fukushima, Japan, in 2011, and Indonesia, in 2004, take most countries only a few years to recover from. The effects of COVID-19 on global supply networks and economy are anticipated to last for at least ten years.
The COVID-19 outbreak and how manufacturers are responding to it serve as a stark reminder of how brittle global supply networks may be.
Dependence on unreliable foreign sources for these products has resulted in shortages of personal protective equipment (PPE), medical testing equipment, dialysis products, medications, and other essential medical supplies. Emphasizing the use of products that may be recycled or used for new purposes is one long-term option.
According to Supply Chain Management Review, the epidemic has ravaged the food and beverage industries, reducing operational capability “from farm field to consumer.” New COVID-19 regulations have increased the cost of production, processing, packing, and delivery, and stay-at-home orders have caused a decline in the demand for restaurant food service.
The closure of several manufacturing facilities by auto manufacturers was prompted by a shortage of semiconductors brought on by COVID-related supply chain problems. Due to the shortfall, Ford Motor Company announced a one-week closure of a facility in Louisville, Kentucky, and Fiat Chrysler and Toyota North America both delayed the inauguration of new plants.
Manufacturers and other firms are utilising possibilities to implement significant operational adjustments in an effort to mitigate the economic impact of COVID-19. Accenture lists the following five areas for supply chain improvement:
By encouraging innovative work practises, you can keep employees healthy and productive.
the data on demand, inventory, capacity, and money should be more visible.
By carefully analysing the data, determine which market micro-segments are the most lucrative.
By assembling quick-reaction teams equipped to manage a variety of eventualities, you may prepare for future disruptions..
Imagine various supply chain scenarios and create plans based on the best solutions for each one.
Maintaining Supply Chains While Keeping Employees Safe.
The U.S. and other nations confront significant obstacles as they attempt to maintain vital industrial and other supplies while safeguarding workers and halting the virus’ spread. Shipments of commodities via U.S. ports were not subject to the restrictions on human travel that were put in place to reduce the spread of viruses.
The difficulty for manufacturers is to continue operations without endangering the health of its workers. 13 million people are employed by U.S. manufacturers, according to PwC, but very few of them are able to work remotely. Many manufacturers are looking into automation technologies like robotics and autonomous materials movement to separate people in manufacturing environments due to the increased danger of virus spread among employees.
How the Epidemic Exposed Vulnerabilities in the World’s Supply Chains
Prior to COVID-19, manufacturers prioritised cost-cutting over all other objectives. This resulted in an excessive reliance on single-source suppliers, a focus on the lowest bids, and a lack of supply chain transparency. According to David Chesebrough, vice president of the National Defense Industries Association, “a considerable lot of fragility” has been “injected” into the manufacturers’ reliant global supply chains by JIT and other cost-saving strategies.
When the pandemic broke out in early 2020, supplies of goods and resources like medical supplies, essential security equipment, and electrical and computer parts quickly ran out. According to Institute for Supply Management CEO Thomas Derry, the lack of openness in the business practises of overseas partners also left supply chains open to vendors peddling fake goods.