2020's Coronavirus pandemic shut down much of the world, but what has been the impact for global supply chains?
Coronavirus has undoubtedly transformed the way many industries operate – and this includes the transformation of traditional logistics and supply chain models. The industry had to respond rapidly to the challenges posed by the crisis, and many of the changes could become permanent.
Here are 3 ways the pandemic is impacting global supply chains:
1. Supply chains are going from global to regional
With the global coronavirus pandemic closing many international borders and placing strains on exports and imports, local markets are moving away from dependency on overseas suppliers and looking to their own backyards to source, manufacture, assemble and deliver goods and services.
This means we’re likely to see logistics hubs around the world re-emerge at regional level, and less global reliance on manufacturing giants such as China. It’s estimated that large electronic equipment manufacturers currently source around 40% of their parts from China. In addition, Europe has imported around 80% of the active components of its drug supply from China and India.
As the coronavirus crisis continues to unfold, we can expect to see European governments sourcing these supplies from their own region. These changes will trigger a worldwide shift to regional production, and present a unique set of industry challenges and opportunities.
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2. Consumer staple supply chains continue to see increased demand
As coronavirus has put many countries in lockdown and citizens look to stock up on a range of essentials, supply chains have seen a significant boost in demand for consumer staples.
Panic buying demonstrates this trend, where many consumers around the world have purchased months’ supply of goods in a single day (toilet paper is one of the most popular examples of panic buying during the coronavirus crisis).
This trend is set to pose challenges to food supply chains especially, where timely delivery and consumption is essential. However, it will pose significant challenges to consumer staple supply chains more broadly, as they experience an unprecedented, massive spike in consumer demand and scramble to successfully meet this demand.
3. Production facilities are being repurposed
Coronavirus has not only prompted some production facilities to drastically boost their output, it has also prompted some facilities to repurpose in response to rapid changes in market demand.
Examples of this include global beauty and luxury brands such as L’Oréal, LVMH and Coty, that have repurposed their production facilities intended for hair products and fragrances to produce hand sanitisers. Other examples include fashion brands that have repurposed their production facilities to produce face masks and protective clothing for healthcare workers during the pandemic.
This repurposing can not only provide a valuable resource in saving lives and supporting essential services during the pandemic, but also in helping production facilities retain staff and continue to operate.
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