Supply Chain in Post COVID-19 world

● Months before the pandemic, fragile geopolitical stability and legacy terms led to protectionism
and new financial barriers to which Covid-19 added broader challenges and concerns for the supply
chain networks operating on a global level.

● The impact of Covid-19 on China led to economic and financial consequences felt through global
supply chains. The effect of plant closures and supply shortages led to significant disruptions in
the supply chain.

● As per the Institute for Supply Chain Management, in India, 39% of companies faced a severe
impact on their supply chain with a 22% reduction in target revenues. Hence, most of the
companies are revamping crisis management mechanisms and remodelling supply chains.

● Just-in-time processes are being revised and in order to prevent supply chain disruptions,
companies are building larger inventory buffers. Also, the strategy of building larger capacities is
evolving and profitability is now the focus. Firms like DSV that operate in global transport and
logistics have grown their Indian region revenues at 68% with gross profits at 50%.

● On the other hand, since online delivery options accelerated and retailers faced challenges on
operating margins and models, the hoarding of essential items caused an irregular spike in demand
and supply fluctuations. The resultant bullwhip effect created disruptions in the entire supply chain
leading to artificial shortages.

● The globalized supply chain network optimized for minimum cost has been replaced and there is
a return to the regional supply chain to eliminate single-source dependencies. One of the examples
could be Europe which imported 80% of its drug components from India and China are now
expected to draw these supplies from their region due to disruptions in the production of active
pharmaceutical ingredients (APIs) and shortages of raw materials in China and India respectively.

● Since drones have been helping to create more resilient supply chains and socially distanced
delivery services, they are a good solution to deliver low weight products. The Covid-19 crisis has
also accelerated the use of drones for the delivery of goods thereby driving innovations in the
policy.

● The pandemic is leading to the transformation of linear supply chains which minimized costs and
reduced inventories into digital supply networks (DSN) which are prepared to adjust and recover
themselves quickly from any unanticipated supply chain disruptions that may occur.

References: https://www.imd.org/research-knowledge/articles/A-post-COVID-19-outlook-The-
future-of-the-supply-chain/

https://www2.deloitte.com/content/dam/Deloitte/ca/Documents/finance/Supply-
Chain_POV_EN_FINAL-AODA.pdf