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Covid-19 Impacts on Supply Chains

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Covid-19 Impacts on Supply Chains

Since the onset of the Covid-19 pandemic on 31st December 2019, when the first case

was reported in Wuhan, China, the world's economy has never remained the same again. The

novel disease was discovered when the economy was on a spiralling trajectory, with most

countries in the world registering significant growth in their economies. The unpredicted

happening initially seemed like the passing flu that would not have lasted long. The disease,

which originally affected China alone, progressively led to thousands of people in China

dying. The pandemic would soon be reported in other parts of the world, indicating that it had

started spreading through air travel. With increased deaths in China, the country was locked

to contain the disease from spreading. However, it seemed a bit late because the disease had

started spreading like wildfire in various world countries.

Numerous deaths from the pandemic led to the closure of the world's fundamental

sectors of the economy, including industries, air travel, and ultimately tourism. No one saw a

time when the world would be shut down completely, with all sectors unable to carry out

their activities as usual. The pandemic impacts have been felt deep and wide. According to

Sharma et al. (2020), the world economy's major sectors greatly impacted the hardest-hit

sectors in the supply chain, which ideally holds all other economic sectors' fundamental key.

The supply chain refers to the network of all the activities, resources, and individuals

contributing to creating and delivering a product to the end-user. It encompasses all the

processes involved, from delivering raw materials to the manufacturers to sell a finished

product to a customer. So how has Covid-19 impacted the world's supply chains sector?

Manufacturing is a central part of the supply chain involved in the production of

finished goods, and it has dramatically been affected by the coronavirus pandemic. China,

where the disease originated, is among the world's leading manufacturers of various essential

products holding 16% of total global exports. Additionally, the United States and Germany
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are also among the world's largest manufacturers, and they were also affected dramatically by

the pandemic. The three countries combined would account for nearly 30% of the total global

exports. The disease's prevalence caused the countries and others to lock down and restrict

their transport systems, such as air travel, implying that there would be no goods entering or

leaving the country (Xu et al., 2020). Manufacturing relies on raw materials that are mostly

imported from foreign countries. With lockdown imposed in most countries globally, it meant

that raw materials would not reach the manufacturers.

Additionally, most processing and manufacturing plants are labour-intensive,

requiring many workers to carry out the production activities. The imposition of Covid-19

containment measures such as social distancing implied that only a fraction of the required

staff would report to work. Eventually, manufacturing would be affected, leading to null or

low production of products. In other countries, manufacturing was closed down, leading to

the unavailability of various goods and products required for consumers. Therefore, the

retailers who are part of the supply chain lacked the goods to sell to the end-users. The

closure of some of the manufacturing plants that retailers initially relied on for products

caused them to shift to other manufacturers who would be produced using alternative ways.

Sourcing for raw materials and products from new sources comes with a cost implication,

leading to high production costs.

Another aspect of the supply chains that have been affected significantly is the

logistics sector involved with the movement, storage, and flow of goods to the retailers and

ultimately to the end consumer. It is an integral part of value chains that facilitate trade and

commerce both internally and across foreign borders helping the manufacturers connect to

customers. Due to China's global manufacturing role, the production processes' pandemic

disruptions led to ripples through global supply chains. Due to travel restrictions and social

distancing measures, cargo backlog at China's major container ports caused a shortage of
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drivers to transport containers while ocean carrier's transport ceased operation. According to

vanov, D. (2020), the rapid spreading of the pandemic to other parts of the world led to

lockdowns and border closures that caused restrictions to goods' movement. The pandemic

impacted the freight capacity of the primary global means of transportation: ocean, land, and

air. The total container volumes initially handle at the various ports saw a significant drop

with blank sailings resulting in the disease's progression.

Land freight was partially affected by the roads remaining operational save for the

countries under strict lockdown guidelines. Difficulties with air and water transport led to

straining the trucking capacity due to the additional demand for their services. The reduced

employee availability led to increased transportation rates. Notwithstanding, air travel

volumes plummeted due to sharp reductions in passenger flights and reduced manufacturing

in the major manufacturing countries—moreover, the low demand for air freight and overall

reduced capacity led to increased air freight rates. Therefore, the impact of the pandemic

containment measures on the transportation sector, which is critical to the global supply chain

activities, resulted in constraints to the supply chain's smooth functioning, thus adversely

affecting global business and industrial activities.

The Covid-19 impacts have also been felt in the supply chain's sales and customer

support services sector. With the pandemic has impacted the initial steps of manufacturing

and logistics, the product's delivery to the consumer has not been exempted either. The

supply chain's ultimate goal is to deliver the product to its users by selling it to the consumer.

Queiroz et al. (2020) assert that the pandemic has influenced the supply of goods, leading to

shortages of the products in the market, which affects the final prices of goods due to the

forces of demand and supply. The reduced manufacturing of goods has caused a reduction in

the supply of the product in the market, thus failing to meet the demand. The higher rates of
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manufacturing and logistics ultimately translate to higher costs of the goods acquired by the

consumer.

The effects on the sales of the goods to the consumer also imply customer support

services as part of the supply chain activities. In the event of a successful sale of a product to

the consumer, the customer support services would be restricted by the coronavirus

containment measures. Travelling restrictions through lockdowns and travel bans has resulted

in difficulties in offering after-sales services to the consumer. For instance, if a retailer

imports a product that the manufacturer can only assemble, the assembler would be able to

travel to the consumer's location to offer the services. Consequently, the supply chain activity

of sales and customer support provision has been dramatically affected by the effects of the

coronavirus pandemic.

Seemingly, the supply chain is arguably the most affected sector of the economy.

With the supply chain's footprints evident across every other sector, being affected by the

pandemic implies that almost every other sector is impacted (Inoue & Todo, 2020). It is

because every industry has its supply chain section as a component of its business activities.

Among the industries whose supply chains were mostly impacted by the pandemic translating

to negative financial impacts include the retail, healthcare, automotive, food value chains,

transportation, education and, energy and industrial. Besides, the pandemic effects have been

a lesson to the supply chain industry to research and explore sustainable methods that would

keep the industry running in the event of such predicaments. During the pandemic, most

companies improved their technology investment to create digital supply chains that can help

enterprises navigate such uncertain economic environments, thus responding faster to volatile

supply and demand.

In conclusion, despite most industries suffering negatively, others benefited

tremendously with their supply chain systems seemingly more engaged than ever before.
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Such enterprises include e-commerce services, which reported exorbitant profits during the

pandemic due to the lockdown and travel restrictions imposed to contain the pandemic. The

e-commerce companies saw increased orders for their products to deliver to the consumers

who remained ground in their homes. The entire process of providing the services to the user

required the employment of supply chain services. Therefore, other industries and the supply

chain sector at large can consider digitizing their activities to help them overcome the effects

of such unpredictable events in the future.

References

Inoue, H., & Todo, Y. (2020). The propagation of economic impacts through supply chains:

The case of a mega-city lockdown to prevent the spread of COVID-19. PloS

one, 15(9), e0239251.

Ivanov, D. (2020). Predicting the impacts of epidemic outbreaks on global supply chains: A

simulation-based analysis on the coronavirus outbreak (COVID-19/SARS-CoV-2)

case. Transportation Research Part E: Logistics and Transportation Review, 136,

101922.

Queiroz, M. M., Ivanov, D., Dolgui, A., & Wamba, S. F. (2020). Impacts of epidemic

outbreaks on supply chains: mapping a research agenda amid the COVID-19

pandemic through a structured literature review. Annals of operations research, 1-38.

Sharma, A., Adhikary, A., & Borah, S. B. (2020). Covid-19′ s impact on supply chain

decisions: Strategic insights from NASDAQ 100 firms using Twitter data. Journal of

Business Research, 117, 443-449.

Xu, Z., Elomri, A., Kerbache, L., & El Omri, A. (2020). Impacts of COVID-19 on global

supply chains: facts and perspectives. IEEE Engineering Management Review, 48(3),

153-166.