The Impact of COVID-19 on Global Supply Chain: Evaluating the Suez Canal Incident in 2021

The sudden outbreak of the corona virus pandemic disrupted the business procedures of all the industries in the entire world. The initiatives are yet to recover from the crisis situation because of the financial condition and global supply chain, which was disrupted due to manufacturing operations. In 2020, every country imposed lockdown in order to prevent the spraed of deadly virus. As a result, many businesses were temporarily closed down, resulting in the disruption of the manufacturing operations. The global supply chain faced problem, as there were lack of resources and delivery demands. The supply chain or the companies that were heavily dependent on the factories of China for raw materials and parts became the most vulnerable during the initial stages of COVID 19. In this study, the impact of the corona virus on the global supply chain will be thoroughly evaluated in reference to the ship crash of the Suez Canal in 2021. The effects along with the alternative approaches will also be discussed in this study.

Impact of COVID 19 on manufacturing operations

The production, as well as the customer demands, has completely changed due to the sudden outbreak of the corona virus. Most of the business professionals and policy makers are trying to find effective methods and policies to change operation patterns and match customer satisfaction. The effect on the global supply chain is huge because the bulk of raw resources is supplied from China along with other Asian emerging countries, according tointernational supply chain perspectives. Due to the restrictions imposed, the companies are not able to get adequate supplies or continue with the manufacturing processes. Therefore, due to the inadequate resource problem, the manufacturing operations have been disrupted (Kumar et al. 2020). Therefore, the revenue streams got disrupted, leading to a financial crisis. Majority of the transportation routes and delivery ways between suppliers and consumers were disrupted by the COVID 19 global pandemic. Currently, it has become critical to examine sustainable manufacturing and consumption patterns (Taylor and Francis 2017). The large scale businesses were temporarily shutdown, and the production of daily necessary products decreased at a rapid rate. As a consequence, consumption of several non-essential items and services has decreased rapidly. Due to the reduced manufacturing rate, the global marketplace and consumer demands also changed.

Role of China as the workshop of the world

China has been considered as the "workshop of the world" due to the economic capacity of the country. According to many experts, China has become the world's largest economic miracle because of its rapid financial growth. Industries, and the economic condition of China, largely grew, especially after 1979, when foreign investment and trade were opened through diplomatic ties between the US and China. Before the global pandemic, China had billion-dollar export industries such as raw materials, textiles, consumer goods, intermediate goods and components. The value of the export industry reached up to a trillion US dollars until the supply chain disruption due to COVID 19 pandemic (World Economic Forum 2020). It can be observed that manufacturers throughout the world rely on China for the majority of their raw and manufactured materials along with components and significant subsystems. The Chinese manufacturing companies have faced severe difficulties in gaining the previous number of export rates; however, foreign manufacturers have also been affected by component constraints in their supply chains.

Impact of COVID 19 on manufacturing operations

In order to revamp the export market and overcome the supply chain crisis, industries and the government have taken several strategic policies, which are also beneficial for the foreign market. Apart from the pandemic, due to a variety of issues, businesses within China are taking a long time to re-establish standard manufacturing operations. The Chinese industries are facing difficulties regarding scarcity of components from lower-tier suppliers, labourer shortage, strict requisites for businesses to establish sufficient safety precautions and poor financial conditions due to market disruptions (Govindan, Shaw and Majumdar 2021). Another difficulty is that international firms are still refusing to trade with Chinese firms in order to prevent the outspread of the corona virus. As the COVID 19 problem has increased competition for crucial sources of supply, negotiating leverage has moved from original equipment manufacturers to the suppliers in key manufacturing industries, including electric vehicle production (Haren and Simchi-Levi, 2020).

To satisfy the production demands, Chinese businesses have grown more inventive and imaginative in their recruitment efforts. It has been found that some of the companies bargained with local authorities for approval to deploy chartered vehicles and even planes into distant areas to fetch back workers and supply essential components (Nandi et al. 2021). Therefore, it can be considered that as the country with the largest industry numbers, the main motto of China has become to start exporting and importing supplies by clearing transportation, taking permission of the governments and increasing the number of employment further. With the help of these strategies, the financial condition can also be recovered.

Suez Canal incident during the pandemic and its impact on supply chain

Suez Canalis located in Egypt, and it is considered one of the busiest waterways in the world. Ever Given’, a 1300-foot cargo ship accidentally stuck horizontally in the canal, results in the blockage of the waterway. The major problem was that this blockage caused stalling of approximately 372 vessels of several supplying companies(Jaeger and Jaeger, 2021).It resulted in the delay of necessary deliveries such as vital medical supplies, an important food and even fuel supplies. Not only the maritime industries but also the major international businesses utilise Suez Canal as the main route of supplying, and this event has brought attention to the vulnerable structure of the global supply systems. The temporary closure of the canal triggered a cascade of international supply chain breakdowns, worsening the already crowded port points, delivery centres and the rail yards. Due to the blockage of this busiest waterway, and stalling of more than three hundredvessels, the companies faced containers and ships shortages (Bbc.co.uk. 2022). Delaying of shipments, including raw material deliveries, created a negative influence on consumer item manufacturing as well as downstream manufacturing. Several large global companies, especially those without a diverse and resilient supply chain, may not share that confidence, particularly those with global supply networks already pushed hard by the pandemic (Belhadi et al. 2021). Furthermore, businesses need to deal with the worldwide disruptions, and the sharp shifts in customer demands.

Role of China as the workshop of the world

Alternative approaches

As a result of COVID 19 pandemic, almost 75% of the companies reported that their supply chain, and the manufacturing operations, was disrupted. The international industries are yet to overcome the supply chain scarcity, manufacturing and financial crisis. However, the industries need to develop alternative approaches for the supply chain management, which are beneficial for mitigating risks and crises regarding the global supply chain.

One of the most important steps is to evaluate and identify the current problem that basically causes supply chain disruption. Many companies do not have a robust supply chain, and some of the companies depend on single supply chain sources (Althaf and Babbitt 2021). The supply chain disruption can lead to temporary or even permanent shutdown of the business operations. Therefore, understanding the root cause of the disruption is crucial for developing appropriate alternative solutions.

Collaboration can be an alternative approach for overcoming this crisis. Risk planning with partnering industries can provide various perspectives, and it will also be beneficial for acquiring more suppliers from various countries (Ivanov and Dolgui2021). Working with suppliers, other carriers, customers as well as data centres to verify their emergency restoration and operational continuation plans are compatible with each other is important. These prevent a company from getting into further legal problems with others. Engaging people in risk management planning emphasizes their value as partners and enhances their risk mitigation role.

It can be observed that the companies that lost vessels during the Suez Canal incident faced a lot of financial crises. Therefore, incorporating insurance policies on the cargo or vessels is crucial for preventing this type of situation further. It is necessary to note thatthose carriers' liability is not the same as the insurance (El Baz and Ruel 2021). Therefore, the selection of a cargo insurance provider that can ensure in-transit shipments and warehoused items against loss or destruction anywhere in the globe is important. With this method, the companies can overcome the financial crisis and invest in order to develop a robust supply chain.

Conclusion

It can be concluded from the overall discussion that the present scenario of the global supply chain is extremely poor, further due to this reason, the international markets are in a crisis. Financial and manufacturing operations have also been disrupted due to the poor condition of the supply chain. Due to the sudden outspread of the global pandemic, the manufacturing operations of several companies were temporarily shut. Several governments restricted the import of raw materials and components from the Chinese factories; resulting in the import industries within China faced difficulties in terms of economy. When the companies started investing in associating with a robust supply chain, Suez Canal was blocked by the 'Ever Given' cargo. The condition worsened; as the global industries faced a bigger financial crisis like the crisis in 2008 previously.

References

Althaf, S. and Babbitt, C.W., 2021. Disruption risks to material supply chains in the electronics sector. Resources, Conservation and Recycling, 167, p.105248.

https://www.sciencedirect.com/science/article/pii/S0921344920305632

Bbc.co.uk. 2022. BBC iPlayer - Why Ships Crash. [online] Available at:

<https://www.bbc.co.uk/iplayer/episode/m0013p1f/why-ships-crash> [Accessed 12 February 2022].

Belhadi, A., Kamble, S., Jabbour, C.J.C., Gunasekaran, A., Ndubisi, N.O. and Venkatesh, M., 2021. Manufacturing and service supply chain resilience to the COVID-19 outbreak: Lessons learned from the automobile and airline industries. Technological Forecasting and Social Change, 163, p.120447.

https://www.ncbi.nlm.nih.gov/pmc/articles/pmc7836947/

El Baz, J. and Ruel, S., 2021. Can supply chain risk management practices mitigate the disruption impacts on supply chains’ resilience and robustness? Evidence from an empirical survey in a COVID-19 outbreak era. International Journal of Production Economics, 233, p.107972.

https://www.sciencedirect.com/science/article/pii/S0925527320303224

Govindan, K., Shaw, M. and Majumdar, A., 2021. Social sustainability tensions in multi-tier supply chain: A systematic literature review towards conceptual framework development. Journal of Cleaner Production, 279, p.123075.

https://www.sciencedirect.com/science/article/pii/S0959652620331206

Haren, P. and Simchi-Levi, D., 2020. How Coronavirus Could Impact the Global Supply Chain by Mid-March. [online] Harvard Business Review. Available at:

<https://hbr.org/2020/02/how-coronavirus-could-impact-the-global-supply-chain-by-mid-march> [Accessed 12 February 2022].

Ivanov, D. and Dolgui, A., 2021. OR-methods for coping with the ripple effect in supply chains during COVID-19 pandemic: Managerial insights and research implications. International Journal of Production Economics, 232, p.107921.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7491383/

Jaeger, J. and Jaeger, J., 2021. Bracing for impact: Supply chain risk management post-Suez Canal blockage. [online] Compliance Week. Available at:

<https://www.complianceweek.com/supply-chain/bracing-for-impact-supply-chain-risk-management-post-suez-canal-blockage/30298.article> [Accessed 12 February 2022].

Kumar, A., Luthra, S., Mangla, S. and KazançoÄŸlu, Y., 2020. COVID-19 impact on sustainable production and operations management. [online] Science direct. Available at:

<https://www.sciencedirect.com/science/article/pii/S2666412720300015> [Accessed 12 February 2022].

Nandi, S., Sarkis, J., Hervani, A.A. and Helms, M.M., 2021. Redesigning supply chains using blockchain-enabled circular economy and COVID-19 experiences. Sustainable Production and Consumption, 27, pp.10-22.

https://www.ncbi.nlm.nih.gov/pmc/articles/pmc7566799/

Taylor & Francis. 2017. China: Workshop of the world?. [online] Available at:

<https://www.tandfonline.com/doi/abs/10.1080/14765280500119973?journalCode=rcea20> [Accessed 12 February 2022].

World Economic Forum. 2020. How China can rebuild global supply chain resilience after COVID-19. [online] Available at:

<https://www.weforum.org/agenda/2020/03/coronavirus-and-global-supply-chains/> [Accessed 12 February 2022].

ggggg