The Impact of COVID-19 on the Global Supply Chain

The events we are all living and witnessing these days have no precedent for many of us. The COVID-19 pandemic (declared by the World Health Organization on March 12) has disrupted lives and businesses. The highly infectious disease can be mitigated by social and professional isolation. While some people can continue working from home on their computers, things are more complicated in logistics and supply chain.

The Weak Link: Dependence on China

A joke says that God made heaven and earth and the rest is made in China. The COVID-19 outbreak proved that it holds a grain of truth. All businesses reel from the disruption of the supply chain originating in China.

As the biggest source of cheap labor, China has become the largest manufacturer on the planet for everything from basic consumer goods to parts and components for the automotive and electronics industries.

The alarming signs started in late February. As a news outlet reported, various businesses, from foods producers to watch makers, reported delays in replenishing their stocks and order fulfillment. The businesses featured in the article are located all over the world, from the USA to Vietnam, New Zealand and Germany.

The Global Supply Chain in Automotive Grinds to a Halt

The most recent troubling news comes from one of the largest industries: the automotive industry. As of March 16, three major car makers halted production in all their facilities in Europe. Tens of thousands of workers will be affected by technological unemployment, receiving up to 85% of their wages. However, it is likely that some of them will lose their jobs eventually.

The question is: if one of the more advanced supply chains in the world can take such a hit from the global COVID-9 contagion, what can other companies expect? And will they survive these trying times?

What Is the Current State of Disruptions in the Supply Chain?

At Logistic Packaging, we are already receiving worrying signals from our clients. They are looking up to us to offer them any suggestions and ideas to safeguard their business and maintain it at least at break-even level.

As we see the situation, there are two key factors that caused this unprecedented slowing down:

• Long distance shipping routes
• Dependence on imported raw materials and semi-finished parts and components.

We have already discussed the aspect covering imports from China. Now it is time to look at the shippers’ plight. On March 5, the International Chamber of Shipping issued new Coronavirus guidelines for the industry. These new instructions impose restrictions and protective measures to prevent the spreading of COVID-19. As a result, shipping times will become longer.

Road and air transport is not faring any better. McKinsey and Company research firm indicates that the capacity of transporting goods by truck has shrunk by 80%. Meanwhile, the International Air Transport Association (IATA) reports a 25% drop in the price of shares of airline companies.

How Can Your Business Survive COVID-19?

Most governments around the world have announced special measures to protect the private sector during the COVID-19 pandemic. From tax cuts and delays to state aids, these measures will partially help businesses stay afloat in the coming months.

As for entrepreneurs and managers, they need to rethink their business processes and operations. If the current supply chain is collapsing, then they should reinvent it. Practically, each business should seek ways to source their raw materials locally, thus shortening the transit route.

In the past, we used to recommend working with one trusted supplier as best practice for optimizing your logistic operations. Right now, the best practice is to keep your options open and identify suppliers that can deliver the products you need.

Logistic Packaging – Here for You

The team of packaging specialists at Logistic Packaging is taking all the measures to stay safe, without fully disrupting our operations. We are striving to be here for our customers and answer your queries. We were one of the first professional packaging companies in Europe to use Skype video calls to discuss projects with you, and now it proves to be one of the best ways to mitigate the disruption to the supply chain.

We encourage our clients to continue contacting us by email or Skype whenever they need advice, suggestions or information on their orders. Thank you for your understanding under these special circumstances!