The next step is to conduct scenario planning to project the financial and operational implications of a prolonged shutdown, assessing impact based on available capacity (including inventory already in the system). Vulnerability must be an everyday, not a 100-year, planning event consideration. COVID-19's Effect on Meat Supply Chain | RTI As the coronavirus pandemic subsides, the tasks will center on improving and strengthening supply-chain capabilities to prepare for the inevitable next shock. Almost 90 percent of respondents told us that they expect to pursue some degree of regionalization during the next three years. To supply Western Europe with items used there, companies could increase their reliance on eastern EU countries, Turkey, and Ukraine. But our survey revealed significant shifts in footprint strategy. Unlike China, those locations often do not have the efficient, high-capacity ports that can handle the largest container ships or the direct marine liner services to major markets. Of the companies that had difficulties managing their supply chains during the crisis, 71 percent say they are ramping up their use of advanced analytics. For risks that could stop or significantly slow production linesor significantly increase cost of operationsbusinesses can identify alternative suppliers, where possible, in terms of qualifications outside severely affected regions. Different industries have responded to the resilience challenge in markedly different ways. Image:REUTERS/Mohamed Azakir. In situations in which tier-one suppliers do not have visibility into their own supply chains or are not forthcoming with data on them, companies can form a hypothesis on this risk by triangulating from a range of information sources, including facility exposure by industry and parts category, shipment impacts, and export levels across countries and regions. In most cases, neither the automaker nor the semiconductor manufacturer can trace what goes on in these intermediate layers (or tiers) of the supply chain, due in part to lack of trust among parties in supply chains, who fear that the information might be used to replace them or to bargain for a price reduction. If alternate suppliers are not immediately available, a company should determine how much extra stock to hold in the interim, in what form, and where along the value chain. How did the pandemic affect the food supply chain? Even the smallest vendor demands a new level of respect. Hospitals and other healthcare providers have been hit particularly hard. The proactive monitoring of supplier risks was the primary focus of these efforts, yet significant blind spots remain in most companies supply-chain risk-management setups. (Disclosure: I am on the boards of directors of Flex, a large manufacturing and supply-chain services provider where Linton is a senior adviser, and Veo Robotics, a company that has developed an advanced vision and 3D sensing system for industrial robots.) If alternative suppliers are unavailable, businesses can work closely with affected tier-one organizations to address the risk collaboratively. Companies will need all available internal forecasting capabilities to stress test their capital requirements on weekly and monthly bases. Others invested in their distribution systems, so that they could anticipate and respond more quickly to local shortages. Food Supply Chains and COVID-19: Impacts and Policy Lessons - OECD The Coronavirus and the Supply Chain - The Network Effect Do I qualify? Even as the immediate toll on human health from the spread of coronavirus (SARS-CoV-2), which causes the COVID-19 disease, mounts, the economic effects of the crisisand the livelihoods at stakeare coming into sharp focus. The ongoing impact of COVID-19 on global supply chains Many consumers are making large purchases with savings accumulated during the pandemic, sending new home sales to their highest level in 14 years and auto sales to their highest level in 15 years. Large companies that canceled significant business with their smaller vendors and then returned assuming immediate capacity have been surprised that their place in line has been taken by others. This is time-consuming and expensive, which explains why most major firms have focused their attention only on strategic direct suppliers that account for large amounts of their expenditures. Overcoming barriers to multitier supplier collaboration, Visit our Manufacturing & Supply Chain page. These were disruptions to the availability of goods sourced from China; both finished goods for sale and products used in factories in developed markets. Its effects can be seen in the inflation of production and shipping costs, labour shortages, the role of China in the global economy, and the automobile industry, among others. Guided by these reviews, the Administration will act to address both short-term strains and long-term vulnerabilities, such as those due to excessive concentration of production of key inputs in a few firms and locations. In practice, companies were much more likely than expected to increase inventories, and much less likely either to diversify supply bases (with raw-material supply being a notable exception) or to implement nearshoring or regionalization strategies (Exhibit 1). As we continue to face an uncertain road ahead, there are a handful of lessons that the industry can learn from to ensure we adapt this year and beyond. One of the most visible impacts of the coronavirus pandemic has been the strain on the global supply chain, with consumers noticing certain goods are harder to find at their local store. Companies have only partly addressed the weaknesses in global supply chains exposed by the coronavirus pandemic. This is because as part of the change, you can unfreeze your organizational routines and revisit design assumptions underpinning the original process. Over the past year, supply-chain leaders have taken decisive action in response to the challenges of the pandemic: adapting effectively to new ways of working, boosting inventories, and ramping their digital and risk-management capabilities. Almost every company also plans for further digital investment in the future. The views expressed in this article are those of the author alone and not the World Economic Forum. As the coronavirus pandemic subsides, the tasks will center on improving and strengthening supply-chain capabilities to prepare for the inevitable next shock. As Prof. Sheffi explains, this is not just a an issue of disruption in supply. When the company built its next new factoryin the United Statesit repeated the process, using the Chinese factory as the starting point. Its vital to ascertain how long your company could ride out a supply shock without shutting down, and how quickly an incapacitated node could recover or be replaced by alternate sites when an entire industry faces a disruption-related shortage. Not all sectors and products have been equally affected, and different products have experienced disruptions at different stages of the supply chain. Such an arrangement offers benefits: You have a lot of flexibility in what goes into your product, and youre able to incorporate the latest technology. This is how to distribute a coronavirus vaccine to everyone. UCR professor explains the pandemics impacts from toilet paper shortages to potential labor issues. But only 2 percent can make the same claim about suppliers in the third tier and beyond. An overwhelming majority of survey respondents say they have invested in digital supply-chain technologies during the past year, with most investing more than they originally planned. Going forward you will see some differences between different companies. For example, since May 2020, 30 percent of respondents had implemented new digital performance-management systemsan important enabler of supply-chain visibility. .chakra .wef-10kdnp0{margin-top:16px;margin-bottom:16px;line-height:1.388;}What is the World Economic Forum doing to manage emerging risks from COVID-19? Covid-19 shone a spotlight on the tightness of processing capacity within the meat supply chain. That will mean more transshipment through Singapore, Hong Kong, or other hubs and longer transit times to reach markets. Over half of the May increase in core inflation as measured by the Consumer Price Index comes from this sector, if we include prices of new, used, leased, and rental automobiles. Combining these hypotheses with the knowledge of where components are traditionally sourced will create a supplier-risk assessment, which can shape discussions with tier-one suppliers. Those products are then shipped to warehouses for storage and then to retailers or customers. Processes and tools created during the crisis-management period should be codified into formal documentation, and the nerve center should become a permanent fixture to monitor supply-chain vulnerabilities continuously and reliably. We find that supply-chain losses that are related to initial COVID-19 lockdowns are largely dependent on the number of countries imposing restrictions and that losses are more sensitive to. That matters because many of todays most pressing supply shortages, such as semiconductors, happen in these deeper supply-chain tiers (Exhibit 2). Further regression shows a substitution effect between customer and product diversification. The survey was conducted . The tools you need to craft strategic plans and how to make them happen. Many businesses are able to mobilize rapidly and set up crisis-management mechanisms, ideally in the form of a nerve center. The COVID-19 pandemic has created global health and economic disruption. A pandemic is not a latest happening encountered in the history of people due mankind has faced various pandemics in history. By building and reinforcing a single source of truth, a digitized supply chain strengthens capabilities in anticipating risk, achieving greater visibility and coordination across the supply chain, and managing issues that arise from growing product complexity. How COVID-19 is affecting the global supply chain | News Coronavirus's impact on supply chain | McKinsey