Global manufacturing and supply chains are continuing to feel the reverberating effect of the COVID19 epidemic and will do so for months, perhaps years to come. Factories and logistics providers are seeking to resume operations, but continue to face labor shortages, transportation delays, and regulatory uncertainty. As the number of people diagnosed with the Coronavirus now exceeds 320,000 worldwide, with the majority of countries moving on to closing borders and civilian movement, what does it mean for global supply chains?
FACT: Supply chains are interrupted globally
While the Corona virus outbreak originated in China, the impact on global supply chains and inventory due to prolonged quarantines and factory closures is a worldwide epidemic. Extended multiple city shutdowns and factory closures will have a lasting effect on the international supply chain, trade, and shipping. This leaves manufacturers with little alternative to preparing for the worst.
This ‘new normal’ demands that all organizations understand their supply chains, and also the risks that they may be exposed to as a supplier and customer. This is the only way to help and formulate business planning going forward.
Problems with sourcing Raw Materials and Partially Assembled Materials
The coronavirus epidemic is upending the carefully calibrated logistics of global shipping. Interrupted sailing has created an imbalance in containers used to ship goods. The 40-foot containers continue to accumulate in numerous ports globally.
As congestion increases, ports are running out of space, especially for containers that require electrical sources. We still haven’t fully felt the effect of the congestion of reefer containers and disruption of global shipping, which is likely to increase in the upcoming weeks.
“Imagine if you could find a drug against Corona tomorrow, then this logistical catastrophe would be on the world market still for months to come.” says Yntze Buitenwerf, President of Seatrade.
The President of the European Chamber of Commerce in China, Jörg Wuttke, notes that as of March, the supply chain disruptions hit pharmaceutical production in particular, as the German industry depends on China for 80%-85% of the active pharmaceutical ingredients.
Lockdowns and quarantines have led to severe labor shortages throughout the affected regions. Logistics such as pick-up and trucking have been badly affected, leading to companies being unable to take delivery of finished goods.
Unpredictable consumer demand
But the instability of supply chains is not the only challenge. Changing consumer demand is another risk factor affecting the global supply chains amid the coronavirus epidemic. Plunging exports from China disrupt the trade of American goods, especially farm products such as fruit and meat destined for Asia. At the same time, the German car industry is concerned about a fall in exports in the next few months.
Supply chain interruptions: the worst is yet to come
“Businesses learn now how fragile the global production system really is,” Gabriel Felbermayr, president of the Kiel Institute for the World Economy.
The pandemic has spurred sourcing away from the world’s leading manufacturing hub, continuing the trend that was ignited by the recent trade war between the U.S. and China. It becomes clear that the heavy dependence of many industries on a single source of raw materials and partially assembled goods is no longer sustainable.
Industry 4.0’s role and COVID19
Risk management is becoming an ever-more important part of the supply chain manager’s job.
But manufacturers who have not yet started, or are in early stages of transitioning to Industry 4.0 will face further struggles. The versatility to assess and adjust inventory requirements, optimize their supply chains and improve the OEE is now more imperative. Agile manufacturers can turn this period of uncertainty into an opportunity to upscale their factories to meet impending demands that will no doubt fluctuate for the foreseeable future.
Mitigating the supply chain unpredictability with FactoryEye: Connectivity and access to data is more important than ever, as well as the ability to have complete visibility throughout the manufacturing process.
“Industries and the economy in general are in a new territory, finding themselves more vulnerable to the risks of globalization and supply chain disruption. Accordingly, using correct data sets and forecasting tools will be crucial to companies as they navigate the current market environment and continue to make strategic decisions.” Michael Briody and Todd Sibilla of Area 52
The impact of supply chain unpredictability can only be mitigated by real time data, delivered to the right people at the right time. This is where FactoryEye steps in.
Factory eye provides manufacturers with real-time insights into their business and enables them to make live, dynamic, proactive decisions in response to rapidly changing circumstances. This is done by connecting all machines in the factory to each other through sensors (IoT) to relay data. But it does not stop there; connecting the shop floor to the top floor means that ERP systems that management rely on for data are also updated continuously. Best of all, live actionable data is available and business continuity can be ensured from absolutely anywhere with a wifi connection.