How does Coronavirus impact international supply chain?

What is a supply chain?

Supply chain refers to the network structure during the production and distribution of products involved in the process of raw materials suppliers, manufacturers, distributors, retailers, and final consumers and other members through the upstream and downstream members of the connection (linkage). It is a network of companies and business units involved in the process of acquiring materials, processing them, and delivering the finished product to the customer.


What are the characteristics of the supply chain?

The structural model of a supply chain shows that a supply chain is a network chain structure with a demand and supply relationship between firms and firms. A supply chain has the following main characteristics.
Complexity. Because supply chain nodes are composed of different spans (levels) of enterprises, and supply chains are often composed of multiple, multiple types or even multinational enterprises, the structural model of the supply chain is more complex than that of a single enterprise in general.
Dynamics. Supply chain management is distinctly dynamic due to the need for corporate strategy and adaptation to changes in market demand, in which nodal firms need to be dynamically updated.
Responsiveness. The formation, existence, and restructuring of supply chains occur based on certain market demands, and the pull of user demand is the driving source of information flow, product/service flow, and capital flow operations in the supply chain.
Intersecting. A nodal firm can be a nodal firm in this supply chain and at the same time, a nodal firm in another supply chain, and the many supply chains form a cross structure, making it more difficult to coordinate management.

What is the process of a supply chain?

The supply chain generally includes four processes: logistics, commercial flow, information flow, and capital flow. The four processes have their own different functions as well as the different circulation direction.

what is the main activity of the supply chain?

According to the concept of the supply chain, it covers every business activity related to the formation and delivery of the final product or service from the supplier of raw materials, through the factory development, processing, production, wholesale, retail and finally to the user. Therefore the supply chain also covers the three main theories such as production theory, logistics theory, and marketing theory. The main activities of the supply chain include.

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What’s the connection between Coronavirus and bullwhip effect

The bullwhip effect is a visual description of the transmission of demand information distortions in the supply chain. The basic idea is that at each node in the supply chain, when a firm makes production or supply decisions based only on-demand information from its subordinate firms, the untruthfulness of the demand information can backfire along the supply chain, producing a cascading amplification. By the time the information reaches the most source suppliers, the demand information they receive deviates greatly from the actual customer demand information in the consumer market. As a result of this demand amplification effect, the supply side tends to maintain higher inventory levels or production readiness plans than the demand side. Learn more about the correlation between Coronavirus and Bullwhip effect.

bullwhip effect

The recent outbreak of COVID-19 has caused a surge in demand for paper towels and personal disinfection products in many countries and regions around the world, which is a good illustration of the bullwhip effect. This demand is predicted to continue over the next year. The biggest obstacle to supply chain coordination in this process is the sharing of new information and the allocation of resources. The current epidemic is spreading around the world, and due to inconsistencies in production capacity and technology levels in different regions, as well as differences in demand levels, it is difficult to rationalize the specific distribution of these two types of products. Local monopolies or stockpiles will form in some places, while in others there will be large gaps. The sharing of information is difficult to achieve mutual understanding and comprehensive integration. Therefore, at the level of supply chain coordination, there is a serious imbalance between demand and supply in different areas, and in general, there is a phenomenon of demand exceeding supply. Both types of products are consumed in large quantities, and in order to better meet the changing needs of the future, cooperative mechanisms should be established across a large area to maximize the rational allocation of resources to where they are needed.

DocShipper Alert : Although the covid-19 caused a huge damage in the international supply chain, we can still see the application of the bullwhip effect on the newly boomed products - paper and disinfect products. Since the whole supply chain is vulnerable than it used to, every process should be taken consideration into deeply, and we, as a professional agency, can provide all the stable services you needed.

Major new changes in the supply chain nowadays

The coronavirus outbreak has sent shockwaves through the delicate ecosystem of complex global supply chains. With this worldwide background, many companies are finding it impossible to quickly identify and connect with alternative suppliers, which is having a significant impact on production. And this impact may further affect the layout of the global chain. The duration of the epidemic will be so long that supply chains in the worst affected areas will face rupture or even disappear. Multinational companies' supply chains also face post-disruption reconfiguration. PWC suggested that if the epidemic continues to spread through the end of the year even next year, some international producers will have to restructure their chains. As a result, in the process of restructuring the industrial chain in the future, the global supply chain will also show some new changes.

What are the major influences of the supply chain due to Covid-19?

Overall, the impact of the epidemic on the supply chain can be seen in the following aspects:
(1) the global epidemic has led to a reduction in demand and supply and uncertainty in some of the industrial value chain, for example, China's trade with Europe and the United States has been largely disrupted, resulting in the cancellation of a large number of orders from export-dependent enterprises;
(2) upstream factories shut down or reduce production, leading to downstream supply and production challenges, the manufacturing industry is more severely affected by the epidemic compared with other industries, such as supplier shutdowns and shortages of incoming raw materials or parts supply, which can impact manufacturing production and sales;
(3) some of the city blockades cause regional and international logistics terminals and delays, resulting in pieces of out-of-stock or backlogs. At the same time, it also leads to a default on contracts due to the inability to perform on time, which ultimately affects companies' investment decisions being delayed or put on hold.

DocShipper Advice : In this stage, the world is starting to reopen again, thus if you want to do business overseas, especially you are an export-import company, in order to guarantee a stable supply chain for yourself specifically with those enterprises in Asian, we have our own branch located in Asian and can offer great assistance! Don't hesitate to contact us.

How to adjust the supply chain strategies?

The supply chain of the enterprise affects the whole process, the ability to face the rapid recovery of the delivery, inevitably involves market research and consumer guidance, product planning, category management, sales guidance, forecasting, planning and coordination, supplier capacity coordination, inventory use, the whole value chain information synthesis, and other aspects. It can be said that the better the supply chain foundation of the company, the more mature conditions for rework, short rework cycle, the stronger the delivery capacity; on the other hand, the supply chain foundation is relatively weak or lack of upstream and downstream collaboration of the enterprise, facing all kinds of factors that affect the rework, it is likely to be helpless, even the best market outbreak may have nothing to do with you! Here we take 3 industries and will be analyzing its challenges and giving suggestions for them.

What are the suggestions to make the supply chain stable after Covid-19?

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