Tag: pandemic

COVID-19 and its Effect on the Supply Chain

COVID-19 and its Effect on the Supply Chain

Many countries have been forced to take measures to contain the spread of the COVID-19 pandemic to keep people safe. Without a doubt, such measures are highly disruptive to business operations, particularly to the interconnected supply chain around the world.

According to a survey by the Institute for Supply Management, supply chains in different regions have been affected to varying degrees, with 6% of the respondents being disrupted in early March. By the end of the month, drastic disruptions were being reported in North America (15%), Japan (17%), Europe (24%) and China (38%)1.

Shipping, for instance, can be greatly affected by closing for any period of time, with eMarketer reporting that 47% of companies would not be able to continue shipments within 2 weeks of closing a facility2. In addition, Orion Market Research reports that the manufacturing industry is encountering bottlenecks in the supply chain both nationally and internationally – especially in areas severely hit by the pandemic2.

Growth and investment impact

Almost all the countries affected by the pandemic are focusing on fulfilling the high demand for medicines, pharmaceuticals, medical supplies and equipment. This shift has reduced demand for other raw materials and many other traded commodities. Therefore, sectors delivering non-essential goods have been seriously hit with lesser or zero demand during the pandemic. This has influenced the movement of goods across nations and created a substantial gap in supply and demand.

Due to the uncertainties created by the pandemic, forecasts on the imminent economic state are not available yet3. In 2018, the worth of the global supply chain market was at $14.5 billion, growing at a CAGR of 10.5%, and was expected to reach almost $24 billion by 2024. But due to the disruptions brought by the pandemic, this growth is expected to decrease. To make matters worse, the United Nations Conference on Trade and Development (UNCTAD) estimated that the global foreign direct investment will decrease by 5% to15% due to downfall in the manufacturing sector coupled with factory shutdowns.

Going forward

This pandemic has exposed the need to create a sustainable supply chain across the globe. Now more than ever, manufacturers need to be more agile to survive and remain competitive. However, many fail to create a future-proof plan that will help them mitigate the challenges brought by a crisis like COVID-19.

The manufacturing industry needs to take concrete steps to succeed, starting with investments in solutions that help them navigate any drastic changes in supply and demand. To mitigate the effects of shifting demand in the future, manufacturers must learn from the changes brought by the pandemic, and work to preserve their consumer base by meeting consumers where and how they want to shop. This requires them to be able to deliver accurate, complete, rich and up-to-date product content across channels, so they can offer the product experiences that customers will seek during, and after times of crisis.

Sources:

1Institute for Supply Chain Management – COVID-19 Global Supply Chain Disruptions Continue

2 eMarketer – Supply Chain Disruption due to the Coronavirus According to Companies Worldwide, March 2020

3 PR Newswire – Impact of COVID-19 on the Global Manufacturing Industry, 2020

4 Entrepreneur – Covid 19: Effect of the Pandemic on Logistics and Supply Chain

4 Sectors That Are Surviving or Thriving During the Pandemic

Many industries are helplessly watching their numbers plummet due to the COVID-19 pandemic, such as tourism, dine-in restaurants and events to name a few. Others, however, especially sectors in the digital industry, are seeing notable spikes in activity and sales:

Streaming services

Streaming services are one of the very few industries that benefit from lockdowns as more people find themselves seeking entertainment:

/         Gaming. Twitch’s global viewership went up 10%, while YouTube Gaming’s increased by 15% since the pandemic1

/         TV. Netflix’s projected year-on-year subscriptions have grown since the outbreak:2

    •   30.9% – International
    •   3.8% – US and Canadian (UCAN)

/         Music. US music streaming dropped by 7.6% during the week of March 13. However, there was an uptick in streams for the following weeks:3

    •   1.5% classical music
    •   2.9% folk music
    •   3.8% children’s music

Virtual events

Virtual exhibition platform V-Ex recently shared that over 50,000 people recently visited its online trade shows, sales environments and conferences.4 Consumers and businesses that were looking forward to attending big physical events, which were later on canceled, have shown great willingness to attend virtual events. This has encouraged many companies to shift their events online:

/         Google rebranded and shifted its Google Cloud Next physical event to Google Cloud Next ’20: Digital Connect virtual5

/         IBM decided to livestream its IBM Think 2020 developer’s conference6

/         Apple, Microsoft and other tech companies followed suit7

Digital media

According to eMarketer, total worldwide media ad spending is expected to reach $691.70 billion in 2020. That’s up 7% from 2019, but still down from their previous estimate of $121.13 billion.8  However, it’s still quite early in the year, so the numbers might take a turn for the worse—as more and more major events like the Olympics are postponed and advertisers continue to be cautious with their spending. Or perhaps numbers will improve, as China, the second-largest ad market and where a lot of global companies in the world trace their supply chain, is expected to lift its Wuhan lockdown on April 8, 2020.9

eMarketer also reports that they are seeing “early signs of a possible economic turnaround” and are “cautiously optimistic that a potential global economic downturn could also be short-lived, mitigating negative impacts on the worldwide ad market on a full-year basis.”10

E-commerce

Chinese e-commerce giant, JD.com, saw the sales of fresh food such as vegetables and common household staples, such as rice and flour quadruple during the pandemic period of January 24 to February 2, 2020 (the lockdown was imposed on January 23).11  In the US, Gordon Haskett Research Advisory surveyed consumers on March 13 and found out that one-third of them had recently bought food online.12 Among new online grocery shoppers, the retailer of choice was as follows:

/         41% Walmart

/         14% Amazon and Whole Foods

/         10% Target

/         6% Kroger

/         4% Costco

For companies that are not in these four sectors, but that wish to emerge more competitive post-pandemic, KPMG’s Steve Bates had this to say, “You have to avoid the tendency to slash and burn your transformation and revert back to your traditional working model. There is going to be pent-up demand and when this period ends there is going to be a tidal wave of spending and you want to be in position to take advantage of it.”13