The COVID-19 pandemic poses a major challenge to supply chains around the world. Many companies around the world rely heavily on production and supply in China, Southeast Asia, and other low-wage countries. In recent years, widespread global development has forced these companies to rethink their supply chains and their stability and reliability for an uncertain future.
This is not just COVID-19, but many other externalities around the world that affect the supply chain, including increased risk of trade wars, trends towards nationalism and protected trade principles, and issues of sustainability and human rights considerations.
As a result of COVID-19, the overall impact of the outbreak and its consequent immediate measures on international trade has not yet been seen. Prior to the COVID-19 pandemic, some companies began to anticipate this next development, but the crisis exposed these weaknesses in the modern supply chain, and many wondered what to do next.
Trade wars, world politics, and national politics will influence the future of supply chain structures. The global supply chain is beginning to respond to tensions between the United States and China, and the turmoil caused by COVID-19 can be expected to accelerate the pace of that response.
According to trade analysis, China lost its global export market share at an accelerating pace in 2019 as companies moved to other countries. Both countries have grown their consumer goods and technology, media, and telecommunications (TMT) markets to 12% and 9%, respectively, by 2019, primarily at the expense of China.
However, we expect companies to increasingly consider the China Plus One strategy, a business strategy to avoid investing only in China and diversifying the business into other countries.
Investing in technology and sustainability considerations in the supply chain is important. Technology and sustainable development should also be considered when considering the supply chain. The COVID-19 pandemic demonstrates a variety of ways in which enterprises can continue to communicate and manage effectively in remote work environments that many enterprises may use in the future.
In fact, companies with a stronger digital infrastructure outperformed those without it in the COVID-19 pandemic. On the other hand, advances in new technologies such as artificial intelligence and blockchain may offer opportunities for further innovation in the supply chain.
Creating a robust and secure supply chain requires balancing cost-effectiveness requirements, so making significant changes to your existing supply chain is not as easy as it sounds. At the same time, new logistics considerations can also impact the supply chain and its changes. In the near future, companies are expected to look for a more diverse supplier base while developing flexible and cost-effective supply chains.