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11 February, 2022updated 15 Feb 2022 15:05

How supply chains became headline news

The Covid-19 pandemic brought supply chains into the spotlight like never before, but what long-term impact will the past two years have on them?

By Richard Gardham

A strange thing has happened over the past two Covid-affected years. On top of the tragic death toll and lives changed forever, away from the work-from-home revolution and the endless Zoom meetings, aside from the obsessing over R numbers and vaccine waning, the world has discovered the importance of supply chains. Product shortages and empty supermarket shelves have hit many countries, while the topic of reshoring/nearshoring – bringing supply chain operations (and jobs) closer to home to minimise disruption by events such as a pandemic – has become a big political issue.

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Amid all of this, global supply chains have emerged from the worst ravages of the Covid-19 pandemic and subsequent lockdowns in a different shape, but is this shape necessarily better? As Martin Kaspar describes, it has provided a boon for shipping companies, who are reporting eye-watering profits (AP Moller-Maersk increased its earnings before interest and tax almost five-fold to $4.1bn in the second quarter of 2021, compared with the same quarter in 2020). While champagne corks will no doubt be popping in the boardrooms of these companies, the general public – faced with frequent shortages and a rising cost of goods – will prove to be less forgiving, he warns.

Still, it would be justified to describe the big shipping companies as one of the supply chain winners in the two years of Covid, irrespective of the bad feeling they may be bottling up. Indeed, the pandemic has produced many ‘winners’ when it comes to the supply chain industry, as well as its fair share of losers, with regards to both countries and companies, with some falling into both camps. Is China a winner, give that it is still a global manufacturing and logistics titan, or is it a loser, given that many companies have adopted a ‘China plus one’ strategy, which has seen them move away from their reliance on Chinese manufacturing, without fully cutting the country out? This has led to the likes of Bangladesh and Vietnam moving into the ‘winners’ enclosure. It is too early to tell who the long-term beneficiaries of the chaos that has ensued in the past few years will be, as the existing supply chain logic is still flying out of the window.

Self-inflicted supply chain wounds?

One country where there is added complication to judging the impact of Covid-19 on supply chains is the UK. This is because, as you may have heard, the country voted to leave the EU in 2016, and has now signed up to a deal that makes importing goods particularly burdensome. The UK has been a global leader in both trade and investment over the past few decades, in part because its membership of the EU meant that it was part of a vast and almost frictionless supply chain with other countries in the bloc. That is no longer the case, so what is happening with UK investment and trade in this brave, new, independent world? Will the key industrial clusters throughout its regions help the country through what is shaping up to be a dicey time, economically speaking?

The UK’s auto industry is of particular importance to its regions, thanks in large part to mega-investments from the likes of Nissan in the North East and Jaguar Land Rover in the Midlands. This industry, however, is another that is highly reliant on supply chains given its need for just-in-time manufacturing. David Leggett of Just Auto magazine offers his outlook on how the automotive supply chain has adapted to the events of the past two years and how it is likely to fare in the future.

What is at the crux of all of this, however, is how vulnerable we are to supply chain disruption. By ‘we’, I mean countries, regions, companies, consumers and so on. The world is much more educated on the importance of supply chains now we have seen what happens when they come under threat, and we can all see why the smooth, efficient transportation of goods is essential to keeping a country running or a business afloat. Our Supply Chain Vulnerability Index shows some surprising disparities in the world’s major economies, with Germany and China faring very well but the US struggling.

If and when Covid becomes less prevalent in all of the countries of the world, it is likely that global supply chains will retreat from being the subject of regular features in national newspapers and go back to taking up column inches in more niche business-to-business magazines. However, the whole world has been given a glimpse of how supply chains seep into every fabric of our society, thanks to the chaos created within the industry by Covid-19. If one of the outcomes of the pandemic is that these chains are now more robust, that their importance has a new-found appreciation, then that would be a silver lining to the virus’s particularly dark cloud. There will always be a natural disaster, a disruptive event, just around the corner, and supply chains will have to keep on supplying throughout such times. These past two years might just have created an industry better equipped to deal with such challenges.

For more coverage across our publishing network of the issues created by the supply chain crisis, read the following:

Free Whitepaper
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Ohio Battery Supply Chain Opportunities

Ohio is a premier automotive supply chain jurisdiction. Greater than 90% of the state’s exports go to the ICE supply chain. As such, Ohio has a unique opportunity to lead in building a supply chain that capitalizes on the fast growth in electric vehicles.
by JobsOhio
Enter your details here to receive your free Whitepaper.

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