The impact of Covid-19 on supply chains is analysed in EAE’s report “Supply chains in the next pandemic”
04 de August de 2020
04 de August de 2020
What impact has the Covid-19 pandemic had on the global economy? What systems or activities have been most affected during the last few months? Although the spread of coronavirus has had an impact on all areas of the economy at a general level, some areas have been hit harder than others, such as supply chains. Recently, the researchers at EAE Business School, Marcelo Leporati, Manuel Morales and Luis Martul, published a report entitled “Supply chains in the next pandemic: preventing disruptions to supply chains”, which gives a global overview of the issues and presents a series of steps to bear in mind for future pandemics. “Supply chains in the next pandemic: preventing disruptions to supply chains” which gives a global overview of the issues and presents a series of steps to bear in mind for future pandemics.
“The sudden changes triggered by Covid-19 are having big impacts on supply chains, such as breakdowns of stocks, production and transport delays, losses of productivity and greater costs”, explains the report. These supply chain disruptions now represent one of the biggest concerns of modern companies, big and small, because, as they operate in a globalized world, they generate severe economic, financial, social and strategic impacts in organizations.
Spain is among the worst affected countries in terms of supply chains
Spain is not immune to this reality and, as a result, the economic impact of Covid-19 on Spanish GDP will be a 10% drop, with Spanish supply chains accounting for a fall of 3.3% of GDP. “Spain is perhaps one of the worst affected supply chains because of its structure, but also as a consequence of the strategies adopted by the authorities”, emphasize the researchers.
Other countries whose supply chains have been most affected include Italy, the United Kingdom, Russia and the United States. Marcelo Leporati, one of the authors of the report, explains that “this is due to various reasons, such as the greater weight of the tertiary sector in these economies, but the primary cause is the extremely restrictive lockdown measures on economic activity taken by the governments, limiting almost all activity in the tertiary and secondary sectors”.
Previous supply chains disruptions:
The impact of SARS
“Our societies have been hit by previous disruptions, such as epidemics, natural disasters and accidents, which have caused interruptions in supply chains in the past”, clarifies the report. For instance, the outbreak of SARS syndrome in China in 2002 expanded rapidly around much of the world, affecting over 8,000 people in total.
The main difference between the impact of SARS and Covid-19 is that, in the early years of the new millennium, China only represented 6% of the world’s GDP. The influence at a global level was not as powerful. In contrast, “China now accounts for almost half of global output and a third of exports of many sectors, including the household appliance sector, electronic products and textiles”.
The automobile and machinery sectors, medical equipment and consumer goods are among the other sectors most affected by Covid-19 in China, with the 1,000 most important multinationals in these sectors are based in the lockdown zone and all their facilities, including manufacturing plants, warehouses and distribution centres, have been affected, triggering a strong impact on the global economy.
Similarities and differences between Covid-19 and previous disruptions: Managing intangible flows
Supply chain disruption can mean an interruption in tangible flows (goods, service, finance) and/or intangible flows (information, risk, personal relations). In the current crisis, the report explains that it is precisely the management of intangible flows that has been the primary cause of the supply chains problems that have arisen.
The authors state that the interruptions have primarily been caused by factors such as bad risk management by companies, ineffective government management, disinformation spread by the media and the chaotic response of consumers to the situation. “We are faced with a scenario of supply chain interruption caused by non-rational changes in customer behaviour and habits, mainly caused by a saturation of information and panic effect”.
Most widespread trends in supply chain management
As well as explaining the primary causes of the interruptions, the researchers also present some of the most widely applied trends in supply chain management during the pandemic:
Preparing supply chains for future disruptions.Next steps for preparing supply chains for disruptions in the future
Lastly, the researchers from EAE Business School present a series of steps aimed to prepare supply chains for future disruptions:
“The EAE Business School researchers concluded that “as a society, we cannot allow the situation to arise that, when another disruption occurs, half of the companies do not have a contingency plan for potential disruptions. It may be true that the future is hard to predict, but that is no excuse for being unprepared for situations of constant change”.