Few things have the devastating potential to disrupt global economies like an unchecked pandemic. Now, we’re in the midst of one. In the span of 90 days, Coronavirus (COVID-19) went from Chinese epidemic to the catalyst for global recession — with rippling effects still to follow as the virus spreads. Outside of health complications and social panic, Coronavirus’ significant damage comes from its ability to rapidly cripple supply chains.
Axios has reported staggering figures about supply chain disruption in the wake of Coronavirus. Most alarming, Coronavirus has disrupted supply chains for nearly 75% of U.S. companies. A majority of businesses report doubling lead times on products due to lack of freight, ocean, and air transport. Even more concerning, 44% of all businesses surveyed by Axios have no plan in place to adapt to supply chain disruptions from China.
With murky supply chain reporting out of China, the rest of the world has been forced to adapt. Unfortunately, countries are struggling to shift their supply chains at a time when they are facing disruption from the pandemic themselves.
Unprecedented disruption and decoupling
Coronavirus is the clear and present catalyst for global supply chain disruption, but it’s by no means the only factor. The U.S.-China trade war that’s raged for the past 18 months put trade and supply relationships on rocky ground for countries around the globe. That rocky ground dissolved with COVID-19, forcing trade partners to find new channels and suppliers much quicker than they might have otherwise.
Take a company like Proctor & Gamble (P&G). The blue-chip brand and its subsidiaries face supply chain disruptions from as many as 387 different Chinese suppliers, which could affect the output of more than 17,600 products. Simply finding new suppliers isn’t an option for P&G, as it would mean re-tooling the conglomerate’s entire materials sourcing and production approach. For some industries affected by Coronavirus, like pharmaceuticals, reforming supply chains could be downright impossible.
Decoupling from China is easier for smaller brands with less diverse product offerings, but even those looking to diversify their supply chains have to contend with the barriers to entry in developing new supply chains. It’s not an easy undertaking amidst a pandemic.
Borders are closing; trade has plummeted
China locked its borders on January 30. Italy shut down the country on March 11, and the U.S. was quick to follow. Wherever the virus spreads, borders eventually close. Canada, the U.K., France, and Germany have all followed in an attempt to quash the virus. And while it’s the best measure for reducing transmission, it’s crippling the economy.
The rising number of barriers between countries is making it difficult to move goods. Moreover, fewer goods are moving in general due to a global workforce that’s growing sicker by the day. The ripple effects of quarantines, border closures, and more than a million confirmed cases of COVID-19 have created the need for isolation.
Coronavirus has affected society at every level, striking a blow at every link of global supply chains. Until the pandemic passes and we’re able to re-forge them stronger, the world will continue to make due with frequent, unforeseen disruptions.