Running head: SUPPLY CHAIN STRATEGIES 1

Challenges in the Supply

Chain Due to Global Crisis

Faculty of Logistics and Supply Chain Management, Caribbean Maritime University

LM401: Logistics Management

October 21, 2020

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Challenges in the Supply

Chain Due to Global Crisis

A supply chain is a network of facilities and distribution options that performs the functions of procurement of

materials, a transformation of these materials into intermediate and finished products, and the

distribution of these finished products to customers. (Ganeshan and Harrison, 1995). This network

includes the manufacturers, suppliers, transporters, warehouses, retailers and customers.

Supply chain management is the integration of business activities that procures materials and services,

transform them into intermediate goods and final products and delivery them to the customers.( Heizer

et al, 2011). Supply chain management encompasses the planning and management of all activities involved in

sourcing and procurement and all logistics management activities.( USAID, 2019).

Supply Chain Management can be considered an extension of Logistics management with four distinct

differences claimed for supply chain management over the more classic view of logistics, although

some of these elements have also been recognized as key to the successful planning of logistics

operations (Ghiani et al, 2004).

Effective supply chain management is important to businesses as it helps to minimize cost, waste, and time in

the production cycle. Effective supply chain management also helps to mitigate errors and risks. As

globalization increases, the management of the supply chains becomes more complex, thus, it creates

more challenges in the supply chain and interruptions to the smooth flow of goods.

This paper will discuss challenges such as scarcity and trade wars disruptions in the supply chain during the

Corona virus (COVID-19) pandemic and two possible supply chain strategies that can be employed to

reduce or resolve the impacts .

The Corona virus disease (COVID-19) is a illness that causes that causes severe acute respiratory syndrome

with symptoms similar to Pneumonia (WHO, 2019). According to the World Health Organization 2019,

the first case of the virus was identified in Wuhan China early December, 2019 and the outbreak began

in the latter part of the same, which was further declared a pandemic. The outbreak of the virus caused
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unplanned disruptions in the supply chain as China is a country that many businesses worldwide rely

heavily on for both raw material and final products.

The outbreak of the virus causes major disruptions in the supply chain. These disruptions unprepared for by

many businesses, hence they had to adapt and adjust to the changes. China is a country that has been the

largest exporter of goods in the world. China became the world's largest trading country which many

nations depends on for products such as electronics, data processing technologies, clothing and textiles,

optical gears and medical equipment. China also has a large number of dominant industries that created

products and material for export.( Trading Economics 2020) Additionally, China also had the world’s

largest car market and a significant amount of raw materials such as steel. These raw materials have to

be exported to other countries to be processed. China is also a low-cost labor production country which

means, the cost of production in China is less expensive than other countries hence, why so many

countries and companies across the world heavily depends on them.

The overall impact of the Corona virus (COVID-19) outbreak resulted in emergency measures being placed on

international trades, countries closed their borders and implemented lockdowns, movement restrictions

and travel bands on tourist coming in from countries with escalating cases of the virus. The fact that

many countries weren't prepared for these restrictions caused many businesses to run in a shortage of

supplies as the demand for raw material and products increased as the disruption increased. The

disruptions were not only in China and it was not only in supplying the goods but also in the delivering

of the goods. Domestic factories also halt production and in some cases declined industrial activities and

this again resulted in the shortages of supplies.

The movement restrictions implemented in countries across the world further forced supply chains that were

disrupted to become decomposed entirely. With industries closing their doors and halting production,

companies were then forced to change suppliers. Changing suppliers in a pandemic world are expensive

and many companies weren't prepared. Additionally, because of the increase in demand and the

decrease in the supplies worldwide, it became harder for companies to execute their existing resilience
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strategies of shifting production or even switching suppliers. This was because while some country’s

borders started to reopen, others were still closed.

Trade wars and global politics posed another challenge in the supply chain during the pandemic. The constant

threats of trade wars created uncertainties across the globe with major implications for of cost of goods

sold from upstream suppliers forcing global supply chains to react from midstream or adopt to the new

normal. The most prominent trade wars tension was between the United States and China over increased

tariffs which were imposed by the United States on goods coming from China. China in retaliation

weaken it currency which lead to furthers disputes and disruptions as investors began to withdraw

investments to other safe havens. The negative implications the trade war caused increases in the cost of

global trading which then makes it more difficult for multinational companies to make production

decisions and caused a increase in intermediate good and supplies.

In order for companies to move forward during the pandemic they need to implement efficient supply chain

strategies to reduce the impact of the crisis. Strategies that can be applied to improve the supply chain

operations to improve the supply chain may vary depending on the company and if they had already set

up a long-term plan.

Supply chain management operates at different levels namely; strategic level, tactical level and the operational

levels. The strategic level deals with future planning which are necessary for long-term decision

making. The tactical level involves shorter planning cycle while the operational level involves current

planning activities.

At the strategic level, future plans should include improvement and development in technology and

manufacturing. Improvement in technology is vital for businesses operating in this pandemic as almost

all business starts to operate from an online platform and business are getting more involved in e-

commerce. With the technology and equipment businesses will be able to manage their data information

and activities
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At a strategic level, decisions must be taken that has a long-lasting effect on the company, like decisions about

the number, location and capacities of warehouses and manufacturing plants or the flow of material

through the logistics network (Badri, 2012). Managers can use different models to design and plan their

supply chain, models that can help them make decisions regarding the location of the facilities, whether

to open a new location or to add capacity to an existing one, the number of products to be produced in

each capacity, the number of products to be transported from one location to another or a warehouse, the

cost associated with the supply of goods

The supply chain has its own unique set of market demands and operating challenges and yet the issues remain

the same. Companies in any supply chain must make decisions individually and collectively regarding

their actions in five areas; production, inventory, location, transportation, and information

At the strategic level, manufacturing decisions define the manufacturing infrastructure and technology that is required.

Based on high-level forecasting and sales estimates, company management has to make strategic decisions on

how products will be manufactured. The decisions can require new manufacturing facilities to be built or to

increase production at existing facilities. However, if the overall company objectives include moving the

manufacturing overseas which, as previously stated can be very expensive during a crisis.

In conclusion, the supply chain needs effective risk management to deal with the unexpected. Whether that is

customs, tariffs, natural disasters, or issues with global transport (Blume Global 2020). Fewer suppliers’

increases dependency and companies need to negotiate with more than one supplier and not be so

heavily dependent on just one. The cost of shifting the supply chain is expensive. Effective supply chain

management requires improvements in customer service and internal operations. Customer service

improvements involve quick delivery and at a reasonable rate, and maximized customers satisfaction.

Internal operation efficiencies in any business in a supply chain mean attractive revenue and rates on

inventory

Given the complexity of the pandemic, there is reason to believe that the recovery phase will require

unprecedented levels of orchestration and coordination during a challenging and potentially protracted

recovery period. Planning for this recovery now even under uncertainty as the crisis continues to unfold
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will be repaid in more precise and considered actions, and a stronger bounce back. Furthermore, the

actions that a company takes during this recovery period can set the foundation for sustained growth and

performance long after the pandemic is over. Actions taken now to mitigate impacts on supply chains

from corona virus can also build resilience against future shocks. Once the immediate risks to a supply

chain have been identified, leaders must then design a resilient supply chain for the future. This begins

with establishing a supply-chain-risk function tasked with assessing risk, continually updating risk-

impact estimates and remediation strategies, and overseeing risk governance. Processes and tools

created during the crisis-management period should be codified into formal documentation, and the

nerve center should become a permanent fixture to monitor supply chain vulnerabilities continuously

and reliably
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References

BBC News “a Quick Guide to the US-China Trade war,

https://www.bbc.com/news/business-45899310’’ Accessed Oct.17.2020

Blume Global. 2020. “ Supply Chain Visibility

https://www.blumeglobal.com/visibility/’’

Ghiani, G., Musmanno, R. (2004). Introduction to Logistic Systems Planning and Control. Retrieved

from http://www.wiley.com/WileyCDA/Section/index.html.

Hezier, J., Render, B. (2011). Operations Management. Pearson

Porter, A. (2009). Operations Management. Retrieved from:http://www.bookboon.com.

Trading Economics “ China Exports,

https://tradingeconomoic.com/china/exports.” Accessed Oct.17.2020

USAID. (2009). The Logistics Handbook: A Practical Guide for the Supply Chain Managers in Family

Planning and Health Programs

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