Global supply chains and Covid pandemic

The global supply chains have faced a very rough weathers, since January

 Global supply chains and Covid pandemic

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• The story: The global economy became more and more inter-dependent since the 1990s, as supply chains grew in size and complexity. When things were going good, there was no looking back.
• Pandemic arrives: Now, from the U.S. to Sudan to China, large container boxes have been lying at ports, railyards and in warehouses as the pandemic rages on. In an industry with 25 million containers and some 6,000 ships hauling them, each container that’s delayed is economic activity restrained, putting new costs one box at a time on consumers. Goods supplies get hit badly, affecting the plans of people and companies alike.
• The China angle: It’s also a lesson in the ripple effects across global supply chains, showing the limits of diversification as all networks are still closely connected with China. Since most supply chains are centred on China, congestion at one port or factory has far-reaching implications for neighbouring facilities, which trickles out across the world.

1. Take the case of a container of fertilizer - ammonium phosphate - for which an order of eight container boxes is placed, from factories in central China. Before the pandemic, a batch like this would arrive just in time for growers to use during planting season. But during pandemic time, it all got derailed.
2. The culprit: a shortage of empty containers for transport. The crucial return of these steel boxes from trips to the U.S. and Europe has been delayed by everything from understaffing to a lack of trucking equipment to move goods out of ports.
3. Then there was the typhoon season!

• Extreme weather: Traffic on the Yangtze rive in China, which saw a record 2.93 billion tons of cargo pass through in 2019, was hit as waves of extreme weather swept across China in summer of 2021. Authorities had to close the river during storms, creating severe backlogs at Chinese ports as ships wait days for passage to resume. An inevitable result is high transit costs, as freight rates skyrocket on international routes as well as along the Yangtze. In addition to high demand for goods as China’s economy rebounds, the scarcity of vessels is pushing prices higher.
• The Yantian port in Shenzhen was closed in May because of a Covid outbreak, creating congestion for the entire eastern coast, which in turn caused ripple effects across the global supply chain. Shipping also had to be redirected away from Ningbo, the world’s third-busiest container port, after one employee tested positive for Covid. Typhoons and extreme weather have made matters worse. In July '21, the stranded container withstood Typhoon In-Fa, shutting Shanghai and other nearby ports for about four days.  
• Reaching across the Pacific: The biggest U.S. trade gateway with Asia has been clogged with the most inbound container vessels in more than six months. In August '21, many ships were anchored awaiting berth space outside the twin ports of Los Angeles and Long Beach, California. Because of the backup, many ships were diverted to Vancouver.
• Summary: Clearly, the smooth flows of global business as experienced prior to the pandemic, and climate change effects setting in, are a reminder of how the coming years will test the global supply chains system.
• EXAM QUESTIONS: (1) Explain how the integrated global supply chain system has become a risky bet, in a world hit by the pandemic, and facing climate change issues. (2) What changes can be made to the global supply chain system to make it more resilient, and capable of withstanding black swan events?
  

#SupplyChains #China #US #ClimateChange #Pandemic

 

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