Question

How crisis (covid 19) effects SCM in the context of Global economics in 2020

Answer 1

COVID-19 has been at the core of global supply chain hub regions like China, Europe and the United States.
Compared to the previous year, industrial production in China dropped by 13.5 per cent in January and February combined. The pandemic has significant consequences for foreign networks of development, and can leave its legacy for years to come

Most of industrial activity worldwide has been centralized over the past four decades in what has become known as global value chains. Raw materials and intermediate products are transported several times across the globe, and then assembled in another location. The final production will be re-exported to end users in developed and emerging markets. China is at the core of these GVCs for many goods – for instance as a primary manufacturer of high-value items and materials, as a significant buyer of global commodities and industrial products, and as a major consumer marketplace. China also produces several intermediate inputs and is in charge of the manufacturing and assembly operations

China's exports to all regions around the world have decreased. The downturn has been extreme around the world, with the exception of North America, where trade has been decreasing for more than a year due to ongoing US-China trade conflicts. When looking at various individual European countries, including Austria, France , Germany , Italy and Spain, the image of a steep decline in products purchased from China is similar. The collapse of production activity at the core of many GVCs necessarily has implications for producers and consumers in countries that go further up and down the value chains of the products.

Naturally it is still too early to fully quantify the effects of supply chain disruptions due to the coronavirus pandemic. However, it is now clear that China 's initial downturn in production and trade would have a significant effect on countries further up and down the supply chain as most countries have now placed restrictions on movements to prevent virus spread. The resulting decline in demand, combined with concerns about the health and safety of workers due to enforced restrictions on individual movements, has led to the closure of factories which would adversely affect the operations of entire GVCs. In the case of China, the first country to go through a full cycle of the epidemic, manufacturers now have to deal with the double negative consequences of first their own lockdown and second the fall in demand from customers further up the many value chains that their economy commands and contributes to.

If other global GVC hubs experience similar trajectories, the cumulative effect of supply bottlenecks and falling consumer demand may actually increase the risk of global manufacturing entering a downward spiral, causing significant damage to many cross-border supply chains' operations. Therefore, the disruption of GVCs due to COVID-19 may leave as a long-term legacy: a substantial decrease in the potential for industrialization of developing countries by linking into GVCs for many years to come. The COVID-19 pandemic calls for an increase in our efforts to reinforce multilateral policy-making strategies and help countries open up other ways to allow inclusive and sustainable industrial growth.