Editor’s Blog: Integrated supply chains under threat from coronavirus?

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As we look forward to the Supply Chain Conference 2020 on 17 and 18 March I believe that supply chains are facing three major problems, one short-term, one medium-term and one long-term…

The long-term issue is sustainability: more than just a buzzword to target environmentally-conscious consumers , sustainability is a way of doing business that ensures longevity – for investors, shareholders, employers, customers and people all over the planet. It also raises the question of what a shift to a circular economy would mean for supply chains.

The medium-term threat is Brexit. With the UK already departed from the European Union the clock is ticking on signing a trade deal. What that deal looks like, and the time that supply chains and logistics operations have to respond to the new normal will shape the UK economy.

Laurence Boone, chief economist, OECD

In the short-term the immediate threat is Covid-19, which is putting pressure on supply chain resilience across the economy. Primark parent Associated British Foods said that if delays to factory production are prolonged, the risk of supply shortages on some lines later this financial year increases. DHL warned that in recent weeks trade volumes had weakened across inbound and outbound China trade lines – which will affect group EBIT between €60 million and €70 million for February.

However, should the virus outbreak fail to be contained, a short-term squeeze on supply chains could have major long-term implications.

Laurence Boone, chief economist, OECD, warned yesterday that coronavirus could lead to businesses moving away from “very integrated supply chains”.

“What we have seen over the past decade is effective real-time management of stocks and very integrated supply chains,” she said during a presentation for the OECD Economic Outlook Interim Report.

“Since this was put in place there has been trade tensions, particularly over the past two years. Second is a search for a fairer international taxation system them climate [change]posing challenging adaptation issues for firms. [Cornavirus] is the fourth element which interferes with the way production is organised.

“Businesses after this outbreak will look at how they are managing their stock and how they are organising production around the world. How taxation is impacting them and where they should locate firms to minimise disruption from natural disasters, but I think we will see a re-organisation of supply chains.”

If Boone is correct, this would be a major long-term challenge for supply chains… I’ll leave you to tell me whether that is a good or bad thing.

Christopher Walton, Editor, Logistics Manager

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