When we speak about the Global Supply chain we must be aware that in a company, an industry, or an economy, we consider the supply chain as an integral component in it. In General, the supply chain is the administration of the movement of goods and services which includes the transportation and storage of raw materials, of work-in-process record, and delivery of finished goods and services from point of origination to point of consumption.
A Paradigm shift in Global Supply chain
The supply chain is always counted as the backbone of an economy. We have witnessed a steep growth in the world’s population for the last several decades, therefore supply chain is playing a critical role not only for the on-time delivery but it is now serving humanity all over the world.
Global Supply chain and the Pandemic
However, the current pandemic which is identified by WHO as COVID-19 has broken the backbone of the Global Supply Chain very severely. This crisis has tossed every modern strategy ever used in the supply chain in our entire lifetime. The world has never faced such a dilemma whether to save the human lives or the economy, but either way, both of them are facing irreversible damage as the pandemic is taking a strong grip over the entire world.
Governments around the world are forcing a strict lockdown to apply and enforce social distancing among the societies and its citizens. And In most of the countries government has taken effective measures to cope up with this pandemic, Still, there are countries with a high population size are facing a severe issue of the global supply chain in terms of basic necessities, medicines, groceries, etc.
Consequently, we can imagine the scale of disruption in the supply chain that governments and its citizens are facing around the world where delivery of very basic and life-essential items like food and medicine have proven a challenge now. The delivery men of pre-crisis, who were regarded as sections of a workforce for a menial job, are now celebrated and applauded as warriors and saviors, as they have taken up the job to deliver the life essential items.
In the last few decades, world overworked to modernize and globalize the supply chain, the 21st-century society is so dependent on the global supply chain which is created a bottleneck in this pandemic for movement of the goods.
Here are the key elements of the Global supply chain which have got impacted due to the pandemic:
Manufacturing is a crowded zone where men and machinery meet to produce goods. This is a section of the workforce categorized as skilled or unskilled blue-collar employees. It’s essential to bring them together to continue production or manufacturing. Due to the forced social distancing norms applied by the governments, it has put a spanner in the manufacturing wheels.
Manufacturing houses from every industry are still not able to cope with the pandemic and unable to find ways to continue operations. Health and safety have become a major concern in this zone due to the densely populated working environment place. The global supply chain has been affected not only in manufacturing but in other industries as well.
There is so much uncertainty in the current environment that is making everything impossible to predict. Demand is very erratic during the pandemic that is causing difficulties for the analysts to plan and order the goods or services. As the demand planners realize that any demand which is forecast based on current need may not be relevant by the time the material is available for sales.
It is a situation no analyst would want to deal with, in one hand if you plan in excess, the company will face the worst financial risk, on the other hand, if you plan in short, the company will have to take a revenue hit and you risk a supply crisis and a possible loss of your customers. And Demand is something that derives the global supply chain, and without demand its functionality is worthless.
Another important development that happened in the last decade is reducing the lead time significantly in the supply chain. The objective was to improve cost efficiency, as it reduces the inventory cost significantly and focuses strategically more on real-time material availability; however, at the same time, it made us more dependent on the manufacturers remotely located and left the consumers with very little of emergency stocks. It has surfaced an unknown risk that modern strategists never faced, which cannot be solved in the short term.
In the last few decades, cost efficiency has driven major manufacturing to the developing world where the availability of labor is very challenging during the pandemic. Mainly because most of the laborers belong to unorganized industries in the developing world and they don’t have any means for union support or representation to put forward their issues.
There are no records management or database available for these unorganized labors which are now dispersed, disconnected, and untouched from their employers due to the lock-down measures. Also, a very few laborers would like to take risk of going back to the factories to support production fearing their life in the pandemic.
Due to the lockdown measures that governments around the world have taken. There is a complete stop of human activities and anything which is or can be driven or managed by humans, which includes road, rail, sea, and air. All modes of transportation are stalled in most parts of the world. This has added to the burgeoning problem in the supply chain of goods.
It is hard to imagine delivering the goods without transportation services even if it were to believe that it is manufactured during the pandemic. It’s imperative to remember that even the modern global supply chain is fully dependent on the last mile delivery men.
Small size bankers to the large financial institutions, everyone is trying to predict the end of the pandemic. Every company and industry has a fixed cost component in their balance sheet which cannot be avoided irrespective of its company operational or not.
Therefore, they need to plan their finance allocations. It is extremely hard for business leaders to manage the liquidity during the uncertainty when they don’t know when they can restart the production or whether or not they will have their orders from the customers.
Without the state-funded program, many of the small and medium-size industries are on the verge of facing insolvency. Only large corporations with deep pockets can survive the pandemic. Falling of companies and large insolvencies are the biggest threat to the global supply chain of goods.
Service Industry has become an important part of the modern supply chain these days. In addition to the service delivery large corporates, it’s a critical component of operational expenditure in any company now. It has also been severely impacted due to the pandemic. Service as the word gives an impression is regarded as an unnecessary luxury, a privilege, or uncritical requirement for society or industry.
In the current pandemic, the governments around the world have named very few services like Energy, Telecom service, or eCommerce service as essential services that are allowed during the lockdown unless it can be performed or delivered remotely from home environment while maintaining the social distancing norms. New technologies and strategies have to be implemented to strengthen the global supply chain process.
The demand for most services has come to a halt. Consequently, service corporations are hit harder than traditional manufacturing businesses. It’s said to be believed that whenever the demand would return; it will bring demand for manufacturing long before the demand can be expected for service organizations. It is believed that the manufacturing industry creates a demand for service industries. Therefore, it is evident that the service industry is facing incalculable economic losses and effecting the global supply chain.
Every company and industry is woven together that makes an economy, it is all part of the larger modern global supply chain. One industry drives the demand for another which eventually contributes to traditional manufacturing, as part of one globalized economy. Therefore, governments around the world need to strike a balance between the human lives and the economy, as clearly both are dependent on one another, one can’t possibly survive without the other.
So, It’s for businesses to change their global supply chain strategy and start implementing the new technologies which could be ready to face any similar kind of scenario. The situation is very different than before but still we have to cope with these hard times by getting the organization ready for next-level technologies.
If you liked the article please let us know your opinion on the Global Supply chain. Readers are invited to suggest a topic that they want to hear from us. Please feel free to give your feedback in the comment box.