How the COVID-19 Crisis Has the Global Supply Chain in a Stranglehold

Jul 1, 2020 | From The CEO, News and Events

How the COVID-19 Crisis Has the Global Supply Chain in a Stranglehold

The coronavirus, or COVID-19 pandemic has already left a significant mark on essentially every country on Earth. Countries have scrambled to adapt to the shifting landscape of nature. We are now starting to see the unintended side effects of our protective measures.

Many countries have partially shut down their economies. Some places have already been powerfully affected. Companies have shut down simply because so many of their workers have fallen ill at the same time.

At the end of the day, we rely on the products of people’s work to provide for our needs and luxuries. The global supply chain is being sorely tested as people stop buying goods or as certain entities in a given supply chain stop producing those goods.

Read on to learn more about how the pandemic will affect the supply chain and how we can protect the global supply chain from irreparable damage.

The Spread of the Coronavirus

So far, COVID has been kept in check largely by drastic preventative measures like mass quarantining. We are still in the early stages of the virus; quarantines have bought doctors and scientists time in which they can come to better understand the virus.

Sooner or later, economies will have to begin to open up, at least partially. Some countries are even trying to open up now, for better or worse. As quarantining relaxes and more people start to interact, the virus will begin to spread more easily again.

In the early days of the virus, scientists emphasized the dangers of surface transmission. Surface transmission is when an infected person breathes or coughs on a surface. Somebody else can then touch that surface.

The coronavirus cannot actually infect you through the skin on your hands. But if someone touches their face after touching a contaminated surface, the virus can infect them. While scientists initially thought that this was the primary way the virus spread, with time and study, we now know better.

COVID spreads primarily through airborne droplets, which come from an infected person’s breath, coughs, or sneezes. That means that workers cannot simply avoid touching their faces to avoid catching the virus. As long as they’re working in the same airspace, it’s extremely difficult to keep them from passing the virus between them.

The Threats to Global Supply Chains

A supply chain becomes more and more vulnerable the longer it gets. Many supply chains include six or more stages.

A product-to-be can pass through one supplier to another, through a manufacturing system, through distribution, and then out to customers. Sometimes, there are even multiple layers of customers. This happens when someone buys something to resell to others, with or without further processing.

At the end of the chain is the customer, enjoying the product, whether it be food, clothing, medicine, or entertainment. Often, the customers are people who are involved in the supply chain. The same people that grow cotton for clothing manufacturing end up buying cotton clothing for their personal use.

A shortage will occur when any step of the supply chain is disrupted. If the cotton farmers get sick or can’t work, then down the line, people won’t be able to buy cotton clothes.

Or maybe the cotton farmers manage to hold out, but the cotton processors don’t. Even if both the farmers and processors maintain their production, the clothesmakers, distributors, and resellers all need to as well. If any one of them fails, the customer can no longer receive their product.

With the virus transmissible through the air, there’s a very good chance that spreading infections or quarantine measures will impact companies in some of the global supply chains. This becomes even more likely to be true when you realize that some supply chains rely on the processing or production within a certain country.

Even if your country manages to handle the pandemic perfectly, your supply chain may not. Your market’s supply chains probably depend on workers in dozens of countries across the world. Any one of them, or several, might not handle the pandemic so well, and the whole world can suffer as a result.

How Can We Protect Our Supply Chains?

The first thing to protect is the workers. We need to make sure that there aren’t too many people getting sick at the same time. With careful protective measures, social distancing, and partial quarantining, we may be able to slow the virus’s spread over a long period of time.

With a slow spread, only a fraction of our workers will be sick at the same time. That means that the majority of them can continue to work to make sure our global supplies continue to be produced.

The landscape of supply and demand has shifted. Many products or services, like cruise liners and airplanes, may not have many customers for many months or years. We need to be prepared to care for the newly unemployed, as well as recognize that these valuable workers can help sustain other services and products which we need to keep our society functioning.

Benefits of Business Insurance

Even businesses that are essential for our society to function are likely to experience wide swings of demand. It’s important that these companies not succumb to the fluctuating market because we need the products and services they provide.

Business insurance can help people protect a company’s financial solvency. Business insurance can cover a variety of financial hardships, including loss of property, expensive lawsuits, and paying the worker’s compensation of injured workers.

Especially important in these times, quality business insurance can cover the risk of business interruption. With business insurance, your company can focus on providing the goods and services that people need rather than worrying about random drops in demand.

Be Prepared for How the Pandemic Will Affect the Global Supply Chain

We hope you learned something helpful in this piece about the effects of the COVID pandemic on the global supply chain. To learn more about business insurance and how it can help businesses affected by unexpected problems like the pandemic, check out our other pages.