{"id":4201,"date":"2020-03-26T10:55:40","date_gmt":"2020-03-26T05:25:40","guid":{"rendered":"https:\/\/blog.iilm.edu\/?p=4201"},"modified":"2026-04-09T09:26:57","modified_gmt":"2026-04-09T09:26:57","slug":"operations-global-supply-chain-disruption-covid-19","status":"publish","type":"post","link":"https:\/\/iilm.edu\/blog\/operations-global-supply-chain-disruption-covid-19\/","title":{"rendered":"Operations and Global Supply chain disruption by COVID – 19"},"content":{"rendered":"

 <\/p>\n

The Corona Virus has had a large impact on the global supply chain industry. As per the report from Dun & Bradsheet \u2013 \u201c 938 of the Fortune 1000 companies have a tier 1 or tier 2 supplier that has been affected by the virus\u201d. We\u2019ve heard in news and through different social networking sites, the brands like Apple, Microsoft, Nissan, and JCB about the disruption they\u2019ve felt as their factories in China are either closed or are operating with limited production capacity.<\/p>\n

Effect of COVID 19 on Global Supply chain<\/strong><\/p>\n

China is the global center of production and is a major source of finished goods and products. With China being locked down, the global pipeline of parts and components, has become emptier. This pipeline feeds directly to producers, manufacturers, and distributors worldwide. Thus, if the disruption continues, many manufacturers and retailers can see their operations suspended and businesses coming to a standstill.<\/p>\n

China is also a major market for consumable goods and services. The COVID- 19 event has come down as a major impact on the demand of these goods and services for the relevant industries spread across the world, the United States of America and Europe in particular.<\/p>\n

\n

Global Supply chain: Fragile nature<\/strong><\/p>\n

There have been many instances in the past which have disrupted the global supply chain earlier as well. Consider for instance the 1999 Taiwan Earthquake, 2003 SARS epidemic, 2011 Japan Earthquake. With Taiwan being a major exporter of memory chips in 2011, the earthquake cut off a major source of memory chips for computer manufacturers, driving up RAM prices drastically in the international market. The 2011 earthquake that struck Japan affected many automotive manufacturers who relied heavily on inputs coming from Japanese factories, thus disrupting the demand and supply in the market.<\/p>\n

An analysis of the global supply chain shows that it is very fragile and the following are the major reasons which are responsible to lend it to this character.<\/p>\n

\u00b7 Reduced inventory levels: The concept of JIT manufacturing (just-in-time) increases efficiency and lowers the cost of the supply chain, but it also leaves supply chains less resilient to these kinds of sudden shocks and shortages occurring in the world.<\/p>\n

\u00b7 Rigid supply chains: This wouldn’t be a problem if companies were running flexible supply chains. Thus in times of stress, they may move order volumes to alternative suppliers. However, very few companies don\u2019t do so, leaving them unable to locate and communicate with alternative suppliers when unexpected disruptions arise in their supply chain leading to a tangible impact on production.<\/p>\n

\u00b7 Manual supply chain management: A key reason supply chains become rigid is because they are managed manually. Changing orders or shifting suppliers is a lengthy and complex process and is a luxury few businesses have in times of stress<\/p>\n

\u00b7 Lack of supply chain transparency: Businesses are still unaware of what’s happening in the first tier in their supply chain, so they can’t figure out where production capacity risks occur. So that makes effective control of a situation like the COVID-19 outbreak almost impossible.<\/p>\n

\u00b7 Consolidated center\u2019s of production: The globalization of supply chains has led to the creation of specialist production zones \u2014 towns or countries specializing in the manufacture of certain main goods. These have helped ensure the availability of key supply chain components and lowered the overall production cost. And while this is useful when times are healthy, when there is uncertainty it may cause problems That\u2019s because there isn\u2019t the capacity in other parts of the world to plug the gap in supply.<\/p>\n

What to look at now<\/strong><\/p>\n

Leading companies are taking several actions to combat the effects of COVID \u2013 19<\/p>\n

\u2022 The leading companies are considering to shift there available inventory from the present quarantined zones to the areas which are either away from the quarantine zones or near the ports.<\/p>\n

\u2022 The companies are constantly working with Tier 2 and Tier 3 suppliers by either securing allocated supplies or by ensuring overtime assembly capacity .<\/p>\n

\u2022 Firms are taking proactive measures by keeping inventory and raw materials which are currently in shortage in impacted areas.<\/p>\n

\u2022 Firms are also negotiating for future air transportation as capacity becomes available to avoid the ocean freight based lead times.<\/p>\n

\u2022 The Major players are actively looking to substitute the components or the raw materials in situations where the primary supplier has been affected and secondary source has not been affected.<\/p>\n

\u2022 Few of the Industry giants are also considering to redesign the product or alter the material certification where the reliable alternate sources are not readily available.<\/p>\n

\u2022 Industries who currently have their manufacturing units in China are considering to introduce the new products to the alternate manufacturing locations.<\/p>\n

Where to focus next<\/strong><\/p>\n

Improve supply chain visibility<\/em><\/strong><\/p>\n

There is an urgent need to ensure a greater supply chain visibility in the system. It is needed to provide a sight into the capacity constraints in the first, second-and third-tier suppliers. When looking further into their supply chains, multinational producers will achieve a more complete and comprehensive supply chain mapping of the assemblies and sub-assemblies.<\/p>\n

Model new risks and costs<\/em><\/strong><\/p>\n

There is an urgent need to get visibility of the supply chain in the network and provide a line of sight and capability. There is a need for new tools and technology that can provide more information. Risk assessment tools that use machine learning, for example, may identify trends that may suggest futuristic opportunities or threats in geopolitical and global health, macroeconomic and other related areas.<\/p>\n

Focus on resilience<\/em><\/strong>
\nThe persistent nature of such outbreaks would continue to shift the focus of the global supply chain operations toward more a rigorous proactive modelling and multiple dimensions. The COVID19 outbreak is likely to result in a long-term reconfigurations in the supply chain globally to create an inbuilt resilience in the system.<\/p>\n","protected":false},"excerpt":{"rendered":"

  The Corona Virus has had a large impact on the global supply chain industry. As per the report from Dun & Bradsheet \u2013 \u201c 938 of the Fortune 1000 companies have a tier 1 or tier 2 supplier that has been affected by the virus\u201d. We\u2019ve heard in news and through different social networking […]<\/p>\n","protected":false},"author":239,"featured_media":8933,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[],"class_list":["post-4201","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"yoast_head":"\nOperations and Global Supply chain disruption by COVID - 19 - Educate, Illuminate, Inspire: Insights from IILM Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/iilm.edu\/blog\/operations-global-supply-chain-disruption-covid-19\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Operations and Global Supply chain disruption by COVID - 19 - Educate, Illuminate, Inspire: Insights from IILM Blog\" \/>\n<meta property=\"og:description\" content=\"  The Corona Virus has had a large impact on the global supply chain industry. 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