Behind the Scenes: COVID-19 Exposes Vulnerability of the Global Supply Chain

Empty shelves at the grocery store and shortages of essential items like toilet paper are only the visible impacts to consumers like me because of the disruption of the global supply chain caused by the COVID-19 pandemic. We assume these empty shelves and shortages are due to herd mentality and anticipatory anxieties, however, the real culprit isn't consumer irrationality but rather the vulnerability of the global supply chain. Consumers don’t see the production stoppages, and shortages of raw materials, sub-assemblies, and finished goods.

Amid an outbreak as unprecedented and severe as COVID-19, the world is scrambling for normalcy and efficiency. The highly complicated push and pull between manufacturers, suppliers, retailers, and suppliers has been consistently tested throughout the pandemic. However, this is not the first time something unprecedented like COVID-19 had a global impact on the economy, and supply chains in particular – past instances include the 9/11 terrorist attacks, the SARS outbreak in 2002-2003, the Ebola scare from 2013-2016, and the 2008 Great Recession. While all of these events disrupted the global supply chain, none had an impact as great as COVID-19, with “shelter in place” orders keeping parts of the world at home and not working. In the article, “Coronavirus Business Closures Unmask Global Supply Chain Defects,” Nick Vyas, the executive director of the Center for Global Supply Chain Management at the University of Southern California, said the Coronavirus pandemic is a “once-in-a-century disruption.” He added that “previous disruptions have not matched the magnitude, intensity, speed, and end-to-end disruption this pandemic has caused.” One benefit of these previous disruptions is that they have allowed businesses to revamp, or revise their risk mitigation tools in the case of an emergency like COVID-19, but not all have done so. And while the supply chain management system in place today was able to survive past disasters and events, the system didn’t stand a chance against the disruptions that COVID-19 would cause. This pandemic has, without a doubt, shined a light on the vulnerabilities in the global supply chain and will likely force companies and industries alike to rethink and reform their supply chain models.

Current Situation: Struggling Supply Chains

As COVID-19 hurts economies, lifestyles, and families around the world, it has also created cascading issues for companies to deal with. Businesses have been struggling to obtain essential materials, and in turn, have realized the flaws in their management systems. The first blow to the global supply chain was the sudden and unexpected reduction in supply from manufacturing giants like China and elsewhere. The next problem to emerge amid the pandemic was the immediate drop in the demand for consumer goods. While some companies followed in the footsteps of others by investing in their supply chains and mitigating risk before the fact, many did not. The companies who were not proactive and agile, and who didn’t make investments and decisions before the event, have supply chains that are unprepared for a random risk like COVID-19. Companies and industries are being forced to adapt to changes every day, as the standard approaches and techniques used in the past are no longer viable. A surge in demand for products like toilet paper and hand sanitizer could cost companies like Procter & Gamble, who will likely feel the impact of the phenomenon known as the bullwhip effect, which refers to the increasing swings in inventory in response to shifts in customer demand. Companies and industries around the world are feeling the impact of COVID-19 on their supply chains.

The Aftermath: A Long Road to Recovery for Some

According to the Institute for Supply Management, a not-for-profit organization that conducts monthly economic surveys, 75 percent of the companies contacted from late February to early March reported disruptions to their supply chains due to COVID-19. Further, 44 percent of those contacted reported that they didn’t have a plan to deal with said disruptions. That means that the road to recovery after COVID-19 could be a lot longer and a lot harder for some companies and industries. Those companies which invested in their supply chains before the pandemic appear to be performing stronger than their counterparts that did not. Because they prepared, they have better visibility, more information, and no need to panic because they know which of their suppliers, sites, parts, and products are at risk and how to secure them. According to David Simchi-Levi, a professor of engineering systems at the Massachusetts Institute of Technology, most companies won’t be able to restructure their supply chains in the short term, if they had not already. However, Simchi-Levi added that he expects to see significant restructuring in the long term – restructuring of which could hopefully save many companies and industries if an event as unprecedented as COVID-19 were to happen again.

Reaction: Similarities Between Us and the Global Supply Chain

I feel that the current condition of the global supply chain can be paralleled to our lives. Like the global supply chain, we are all feeling disruptions to our daily lives and some more than others. Also, like the global supply chain, we are all feeling a sense of uncertainty or instability. And finally, similar to the global supply chain, our lives will not return to normalcy in the short term because none of us prepared for something as unprecedented as this – the road to recovery will, without a doubt, be a long one.