The Impact of COVID-19 on Global Supply Chains

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The COVID-19 pandemic and the subsequent international lockdowns, as well as, travel restrictions significantly impeded the ability of people to visit foreign countries. Yet, for the modern world economy, which has the highest level of globalization in history, protective measures were particularly challenging. According to the United Nations’ Department of Economic and Social Affairs, the global economic output will decrease by $8.5 trillion over the next two years due to the pandemic (COVID-19, n.d.). Yet, most importantly, the COVID-19 allowed governments and companies to identify serious shortcomings of the global supply chains and enabled them to take measures to prevent scenarios similar to the recent pandemic in the future.

At the beginning of the pandemic, there were numerous news articles reporting from all parts of the world about shortages of medical and personal protective equipment such as ventilators, masks, and gloves. In the U.S., the problem remained unsolved even in December of 2020, when healthcare workers still faced a lack of essential products, which forced many hospitals to strictly ration their existing supplies (Jacobs, 2020). The shortages exposed the issue which has existed for many years but stayed ignored by the officials until the onset of the pandemic, namely, the overdependence on Chinese goods.

In 2018, China produced forty-three percent of the world’s imports of mouth-nose-protection equipment, protective garments, goggles, and face shields (Bown, 2020). Yet, in 2020, when China registered a significant outbreak of COVID-19 in its provinces, the country’s authorities quickly took measures to ensure that its citizens and hospitals had enough of these products. As a result, the government limited the export of medical products and even prohibited it in areas which suffered the most since the internal demand rose (Bradsher and Alderman, 2020). This decision became one of the major causes of the shortage of protective gear in the world.

Yet, apart from protective equipment, which was, nevertheless, the most vital type of product during the pandemic, there were other areas which also suffered from the pandemic, one of them is food security. Despite the fact that developed countries such as the U.S., where farmers managed to change their orientation from restaurants to supermarkets, did not experience any considerable food shortages, the less-industrialized countries suffered the most (Kam, 2020).

In Nigeria, researchers registered a decline in the availability of rice since countries such as India, Vietnam, and Cambodia limited their exports to the nation. Moreover, countries in sub-Saharan Africa rely on imports of rice for 40% of their consumption (George, 2020). It is possible to assume that the Nigerian government will respond to this situation by subsidizing the local farmers in order to ensure that no shortages occur in the future because of foreign agents.

Another global supply chain which was impacted by the pandemic is the industry of silicon semiconductors. The increased demand for various gadgets such as laptops due to millions of people starting remote work, as well as lockdowns in the countries of major silicon manufacturing facilities, led to shortages (Grothaus, 2021). There is currently a substantial lack of products in the market of computer parts, especially graphic processing units.

Shortages were not the only result of the pandemic, companies experienced supply bottlenecks and extended lead times, which could potentially lead to the bullwhip effect. According to Adrian Lightstone, National Manager of WSP in Canada, “The focus on supply chain optimization, inventory reduction, and maximizing asset utilization has left little ability to accommodate a Black Swan event like COVID-19” (What will be the “new normal,” 2020, p. 5).

Essentially, the COVID-19 pandemic demonstrated that globalization which had reached its historical peak was not the most sustainable approach during times of crisis. Global supply chains became the primary target of the lockdowns and numerous restrictions, and the companies which espoused them were the main victims of the pandemic. This enabled many governments and businesses to challenge the existing status quo and change their approach to international supply chains.

There are several factors which must be taken into consideration by authorities and companies to protect themselves from future crisis. According to Willy C. Shih (2020), enterprises must make their supply channels transparent and diversified, decrease their dependence on China, prioritize flexibility over variety, and invest in innovation of internal processes. Recently, President Biden signed an executive order to assess supply chains of pharmaceuticals, semiconductors, rare earth metals, and large capacity batteries with an intention to minimize reliance of the U.S. companies on China (Hansen, 2021).

The trend for reshoring is likely to continue in the coming years as more businesses will start investing in their own facilities rather than use outsourcing. In April of 2020, a survey showed that 64% of manufacturers in North America stated that they were likely to bring their production back home (Ma, 2020). This decision is reasonable since businesses fear the repetition of the pandemic crisis and want to have better control over their supply chain.

The COVID-19 pandemic not only hindered the development of the world economy but also exposed problems inherent to global supply chains and enabled companies and governments to introduce new strategies. The crisis which ensued after lockdowns and travel restrictions led to considerable shortages of medical equipment, as well as other products such as rice in Africa and silicon semiconductors. One of the primary causes of these issues was a high level of globalization of international supply chains. This forced companies and officials to espouse a new approach by focusing on ensuring improved control over supply chains, reshoring, and minimization of reliance on China.

Reference List

Bown, C. P. (2020) ‘COVID-19: China’s exports of medical supplies provide a ray of hope’. Peterson Institute for International Economics. Web.

Bradsher, K. and Alderman, L. (2020) ‘The world needs masks. China makes them, but has been hoarding them.’ The New York Times. Web.

COVID-19 to slash global economic output by $8.5 trillion over next two years. (n.d.). Web.

George, L. (2020) ‘COVID-19 is exacerbating food shortages in Africa’. World Economic Forum. Web.

Grothaus, M. (2021) ‘Why is there silicon chip shortage? 3 factors are to blame’. Fast Company. Web.

Hansen, S. (2021) ‘Here’s what Biden’s supply chain executive order means for U.S. businesses‘. Forbes. Web.

Jacobs, A. (2020) ‘Health care workers still face daunting shortages of masks and other P.P.E.‘. The New York Times. Web.

Kam, K. (2020) ‘How COVID is Affecting U.S. Food Supply Chain.’ WebMD. Web.

Ma, C. (2020) ‘Manufacturer response to COVID-19 disruptions: Increased interest in automation, reshoring [Report]’. Thomas. Web.

Shih, W. C. (2020) ‘Global supply chains in a post-pandemic world‘. Harvard Business Review. Web.

What will be the “new normal” for global supply chains post Covid-19?. (2020) Web.

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