The ongoing impact of COVID-19 on global supply chains

The ongoing impact of COVID-19 on global supply chains

  • Companies should analyze supply chains now to mitigate against future disruptions.
  • Trade wars, global politics and national policies will influence the future of supply chain structures.
  • Investment in technology and considerations on sustainability in the supply chain will be key.

The COVID-19 pandemic has changed the business environment for many organizations around the globe, and has highlighted the importance of being able to react, adapt and set up crisis management mechanisms in order to weather situations of uncertainty. As the acute restrictions and lockdowns created many urgent situations that required immediate attention in the early days of the pandemic, many companies have now begun to move to a “recovery mode” and have started planning for the longer term. As companies seek to strengthen operations and business resilience, the importance of supply chain resilience and risk management is more apparent than ever.

What have we seen happen?

Around the world, many companies are hugely reliant on production and supplies in China, Southeast Asia and other low-cost jurisdictions. In recent years, broad global developments have forced these companies to rethink their supply chains and their stability and reliability for an uncertain future. This is not just in relation to COVID-19 but many other externalities and government actions through the world, which have begun impacting supply chains, such as the increased risk of trade wars, trends of nationalism and protectionism, issues of sustainability and human rights considerations.

The overall impact of the outbreak and the resulting emergency measures on international trade resulting from COVID-19 remain to be seen. However, it is clear companies have been faced with substantial business and operational disruptions, which has included everything from mitigating the effects of reduced supply, to managing disruptions to logistics suppliers, and indeed hurdles in meeting their own contractual obligations to customers. Baker McKenzie recently produced a podcast on shock-proofing supply chains, which covers many of these hurdles in detail.