COVID-19 Disrupting Global Supply Chains: Impact & Solutions - Essay Sample

Introduction

The current global pandemic, COVID- 19, has affected the supply chain by a large margin as countries have locked their borders to protect the spread of the virus to its citizens. The economy of the world depends on the movement of goods and services, and with the epidemic affecting the ability of the human-resource from going from one place to another; it has become impossible for human beings to engage in income-generating activities (Bonadio et al., 2020). Companies have been forced to let go of their once productive and effective workers as they are unable to sustain them due to the looming epidemic. The production capacities in industries have fallen by a large margin since the demand of commodities has reduced owing to the decreased flow of goods and services across the world (Ranney, Griffeth, & Jha, 2020). Economic giants in the world have been affected as they all depended, albeit indirectly, on the movement of commodities to enable them build their nations. African countries have also felt the negative effect of the global pandemic as some of the nations have not managed to sustain themselves enough to produce commodities (Nayyar, Breman, & Herrington, 2015). The developing continent relies on the existing supply chain models to access their most essential and non-essential commodities both in the formal and informal sectors. The global epidemic has destabilized the established supply chains with new regulations being implemented to regulate the movement of people and goods to reduce contact amongst people; FDA approvals are taking a longer period and African countries have been forced to develop stricter measures to protect their nations from being negatively affected.

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Regulations at different sectors in the economy have been intensified to limit the movement of goods and services across the world. African countries have had to deal with the blunt effects of these regulations as commodities are no longer reaching them. Over-reliance on developed nations has proved unreliable as African leaders have been forced to develop coping mechanisms to deal with the shortage of goods and services (Manners-Bell, 2017). Importation rates have reduced and countries have had to come up with strategies to make sure their locally produced commodities find a market. For instance, Kenya, an African country had maintained economic ties with China, one of the global producers of intermediate goods and raw materials. The custom clearance at both countries has been negatively affected which has forced the nations to take drastic measures to deal with the current situation. China is one of the innovative centers in the world that has been playing a pivotal role in producing raw materials that other countries have been using to complete their manufactured commodities (Ranney, Griffeth, & Jha, 2020). With the reduction of human contact amongst people in industries, China’s production capacity has gone down, which has negatively affected the supply chains in industries across the world.

One of the major industries that have felt the negative effect of slowed supply chains is the healthcare. Hospitals around the world depend on key equipment that helps sustain lives of people, some of which are on high dependence units. The increased number of patients infected with the Coronavirus Disease has created urgency for healthcare facilities to demand equipment that will be used in the treatment of new patients (Manners-Bell, 2017). Ventilators are some of the most important key equipment that medical practitioners need at this moment to help patients breathe with ease as the virus is affecting the respiratory system. Countries in the world that had been manufacturing ventilators and other key equipment used in hospitals have been forced to ensure the hospitals in their respective nations have adequate supply, forcing others to go through a deficit. The movement of goods and services has been limited, making it hard for countries with the ability to assemble equipment that could be used in facilitating taking care of the sick hard. African countries depend on medical supplies from developed nations like the US or China, and this has negatively affected their ability to take care of their infected patients. As a result, leaders from African countries have pleaded from the World Health Organization (WHO) to help mitigate the risk the nations are facing of possibly losing their people in thousands if medical supplies do not reach them in time.

The Centers for Disease Control and Prevention (CDC) has stepped in to help close the gap by bringing together the effort of various industries to help use their resources to make temporal devices that can help improve the care extended to patients (Nayyar et al., 2019). State governments across the world have been forced to come up with customized solutions that match the available resources in the country that will help curb the stalled supply chains. Companies operating in both the private and public sectors have diversified their production to other product lines to help curb the menace (Bonadio et al., 2020). For instance, companies that manufacture alcohol have stepped in to help meet the high demand of sanitizers while firms that make automobiles and have the resources, have resorted to design ventilators which healthcare facilities can use to care for their patients.

African countries have also been forced by the growing necessity in the world to boost and support their informal and infant industries (Bonadio et al., 2020). For instance, instead of relying on the recommended N95 guises that have been approved by the Food and Drug Administration (FDA), informal sectors have been encouraged to use proper clothing to make covers for most people. This is because a large number of people in the African countries live below the poverty line, and they cannot afford to purchase the N95 masks for a single use (Manners-Bell, 2017). African countries have been known to depend on second-hand clothes from other nations, an informal sector which has created jobs for millions of people (Nayyar, Breman, & Herrington, 2015; Nayyar et al., 2019). Medical experts have suggested that COVID- 19 virus could be possibly spread through clothes, meaning the informal business in African countries which feeds millions of families has been affected.

Background/Literature

The Global Supply Chain

Globalization has opened up the boundaries of countries and has made the movement of commodities and people easy and fast. In the past few decades, the manufacturing industry has taken advantage of the opened borders across the world and expanded its activities since companies use the established channels to reach their customers (Ivanov, 2020). An organized structure, known as the global value chain (GVC), is a stable supply chain that has been used to facilitate the movement of commodities. Intermediate goods as well as raw materials pass through certain regions in the world before they reach their destinations. China is one the renowned countries in the world that have a stable GVC due to its large manufacturing industry, as a main producer of various commodities, the nation has relied on this platform to supply its industrial products (Bonadio et al., 2020; Holshue et al., 2020). The low production in China has had a negative impact on the world with both external and internal supply chains of African countries being the most affected. Demand and supply have also been affected since people are more concerned about their health wellbeing compared to their ability to work and grow the economy.

The Corona Virus broke out in China which forced the government to impose strict restrictions on the movement and interactions of people, with curfews and quarantines being a strategy to contain its citizens (Sohrabi et al., 2020). By January, many companies had started feeling the negative impact of the disease as they had to let go of their employees, a decision that resulted in the reduced production. China’s current position in the GVC has resulted in the contraction of the supply chain with the movement and quantity of commodities reducing by a large margin (Siche, 2020). Some of the most affected industries are those that depend on intermediate commodities as their main raw material. Industries like the textile and electronic have been negatively affected. African countries that depended on the imports received from global producers like China have had to close down businesses (Holshue et al., 2020; Peeri et al., 2020). Both consumers and producers have felt the impact since a vital ingredient in the production process is missing. African countries rely on other nations for their products. This is because they perceive the products from the developed nations to be of superior quality compared to those they produce locally.

Global Value Chain (GVC)

According to Rowan & Laffey (2020), the effects of COVID-19 on the global economy might have been ignored when it first started in China in 2019, but with the virus spreading across the world, economists’ attention has been drawn to the negative impact this pandemic will have on the countries. Pointers in the growth and stability of the supply chain predict that the economic recession might affect the flow of goods and services from their producers to the consumers (Sohrabi et al., 2020). Developed countries in the world are protecting their safe assets by increasing their values which negatively impacts the African countries’ markets. The virus has a negative retraction effect on the economy, which is a similar effect distraction like that brought about by disasters or wars.

Delays in the custom clearance have resulted in the supply chain disruption as each country has come up with aggressive measures to ensure no contaminated goods enter their borders (Rowan & Laffey, 2020). The supply side shock has affected the production capacities as industries have reduced the pattern in which they mass produce. Layoffs in industries mean that production capacities that were attained prior to the virus are now impossible. The flow of raw materials in manufacturing industries has also reduced by a large margin as the demand for commodities has also reduced. Consequently, consumer confidence in African countries has reduced as they are unwilling to spend their savings on the available commodities due to the fear of the unknown (Gormsen & Koijen, 2020). People that had made small investments or were planning to start businesses that relied on imported goods can no longer sustain their start-ups since the delays at the custom clearance is slow, and the rate at which the commodities are moving is slow due to the low purchasing consumer powers.

Overdependence on the Global Supply Chain

African countries have felt the negative effect from the regulatory issues that global suppliers have introduced since they lack their independent and functional models that would trigger growth in their respective nations (Ivanov, 2020). The current disaster has created the urgency for African countries to find independent solutions without relying on other nations in the world since they are equally suffering from the negative effects of the disease (Gormsen & Koijen, 2020). African countries have relied on oversea manufacturing commodities. Infant industries in this developing continent which are easy to manufacture have failed to pick up due to the negative perception the locals and the government have towards the quality of products made internally. The government has created the impression and perception...