1. Comment
March 10, 2020

Covid-19 exposes the vulnerability of international supply chains

The implementation of quarantine and travel restrictions has exposed a dependence on Chinese manufacturing, highlighting the vulnerability of international supply chains.

By GlobalData Consumer

The spread of the recent coronavirus, officially called Covid-19, has had a huge impact that has rippled beyond human health. The implementation of quarantine and travel restrictions has exposed a dependence on Chinese manufacturing, highlighting the vulnerability of international supply chains.

This is particularly a concern due to the globalised nature of commerce today. According to GlobalData 2018 Q4 consumer survey, over half of consumers (67%) typically buy clothing/footwear online. With much of the world’s consumer goods made in China, sudden ends to factory production have a knock-on effect that impacts the supply chain right through to the end consumer.

French Minister of Economy and Finance Bruno Le Maire has described the Covid-19 outbreak as a ‘game-changer’ for globalisation, revealing what he deems to be an ‘irresponsible and unreasonable’ dependence on China.

The anticipated shortage of items in the supply chain has forced some equipment manufacturers to ration remaining stock to their highest margin production lines. Procter & Gamble CEO Jon Moeller reported at the Consumer Analyst Group of New York (Cagny) Conference 2020 that a staggering 17,600 ‘different finished product items’ could be affected by further long-term damage associated with the spread of Covid-19. The challenges of factory shutdowns also impact the end-user as supply becomes a risk in itself. Consumers may begin to look elsewhere for their goods and services as the virus draws out, losing customer loyalty to better-diversified competitors.

With the UN announcing Covid-19 has reached pandemic levels, the long-term effects of the virus outbreak remain to be seen. However, brands must begin to heighten their risk management, including identifying areas where the supply chain can be diversified. For larger-scale entities such as multinational conglomerates, investment in localized manufacturing may be a prudent decision in order to mitigate further unforeseen circumstances in the future.

Content from our partners
Advanced analytics and predicting market trends in FMCG
How smart predictive analytics is shaping product development
Data analysis in the brave new world

Topics in this article: