It is no surprise that Covid-19
has had lasting effects on various businesses and their operations. This recent pandemic is causing businesses to
look into and question their current supply chains. Lots of industries such as the pharmaceutical
and agricultural industries are experiencing inventory shortages because of the
current situation. Many companies source
their goods and materials from China, which is why Covid-19 is having such an
impact on supply chains and inventories.
Companies are realizing how strong their dependence on China is and are
starting to reconsider their current models.
Mark
Mobius is the founder of Mobius Capital Partners. He said in an interview that the pandemic was
already prompting a rethink among businesses as they sought to mitigate supply
shocks from any future events of a similar scale. "A lot of buyers and a lot of the people
depending on the supply chain in China are now having second thoughts, and are
beginning to diversify their supply chain as much as possible to be closer to
home." Mobius also believes that
the United States will now prefer US based or more local markets such as Mexico
or Canada. Mobius also added that he
believes the diversification will include moving supply chains to Vietnam,
Bangladesh, and Turkey.
In addition to diversifying
supply chains by utilizing new locations, companies may start to emphasize the
use of automation. The current pandemic has shown how fragile
current supply chains really are.
Although there is still much more research and technological
advancements required before these automated systems can be implemented, more
companies will start to take this possibility seriously. Jonathan
Wright, who is the global head of cognitive process re-engineering at IBM
reiterates the importance of automation.
He says "Supply chains are noticing cracks in the system
highlighted by the pandemic. They should
rapidly accelerate digitization to allow supply chains and manufacturers to
emerge stronger."
Fraser
Howie, an independent analyst, said that governments would look to reduce
their dependency on China. He did add
that there was "no way China's going to be ignored." Covid-19 has been an eye opener to
businesses. Many companies are
recognizing how dependent they are on China and how unexpected situations can
have such an impact on their operations.
Although China will most likely not be removed from most organizations
supply chains, organizations will definitely start to diversify their
operations in case a similar situation were to occur again.
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