Covid-19 has brought global economies to a standstill and knocked the confidence in global and connected trade. Would businesses benefit from pivoting to more localised value chains, or do global supply chains enable a global shift towards a climate-resilient future?
The impact of the coronavirus pandemic on international commerce has been described as “ugly”. The World Trade Organisation (WTO) has forecasted declines in international trade and commerce of between 13% to 32% this year.
Impacts to trade through transportation limits and production slowdown are impacting business productivity, with 94% of the Fortune 1000 seeing supply chain disruptions. Elsewhere, a survey conducted by the Institute For Supply Chain Management last month, found that 75% of companies are reporting supply chain disruptions due to impacts of the coronavirus.
Many manufacturers are now jostling to shift the structure of their supply chains to make up for missed deliveries, reclaiming some practices often undertaken by suppliers into their own factories or even pivoting production systems to make different products entirely – as seen by the sheer volume of manufacturers producing protective PPE equipment for frontline medical workers.
There is a risk that this short-term focus on operational capacity and processes could unravel efforts to integrate suppliers into more sustainable practices.
It is apparent that for many organisations, the globalisation of manufacturing has created a scenario where supply chains are unprepared for disruption. They’re either too localised into specific regions or span multiple continents and tiers to the points where end-user businesses won’t be aware of associated links to deforestation, human rights abuse and other environmental and ethical pinch points.
However, the impacts of the coronavirus on worker productivity, economic security and health and wellbeing pose specific threats to business. Many businesses will start to diversify their supplier base to minimise the risk of future disruptions and firms will be expected to assess the resilience of the entire supply chain, including second and third-tier suppliers.
Local vs global
With more than four trillion consumer goods products shipped globally annually, it is a staggering oversight that end-to-end traceability of goods across the value chain remains a “black hole of insight”.
Going forward, businesses and industries will seek to modernise supply chain practices, regardless of whether they are global or local and with the introduction of automation and data exchange in manufacturing technologies and processes which include cyber-physical systems (CPS), the internet of things (IoT), industrial internet of things (IIOT), cloud computing, cognitive computing and artificial intelligence (like Industry 4.0) will likely solve some of the transparency challenges.