COVID-19 Presents New Challenges In Supply Chain Optimization
A new wave of supply chain localization efforts are being fast tracked to offset the disruption caused by Covid-19
As the world works tirelessly to stop the spread of Covid-19 and to treat the people who have been infected, manufacturing companies across several industries are struggling to manage the epidemic’s growing impact on their supply chains.
“One of the things that really became apparent with Covid-19 is the rapid change that has occurred in terms of the critical mass of value chains that have built up in China from 2003 when we had SARS to 2019,” said Alex Capri, a visiting senior fellow at the National University of Singapore’s business school.
According to data published by the United Nations Statistics Division, China accounted for 28 percent of global manufacturing output in 2018. Since the rise of the Covid-19 pandemic, China has been forced to close many of its manufacturing plants, causing widespread global supply chain disruption. Many businesses will look to mitigate risk by diversifying value chains, reevaluating their sourcing strategy and the raw material supply that contributes to their products.
“We are going to see massive restructuring of supply chains,” said Capri, who has over two decades of experience in various trade roles including leading the Asia trade and customs practice at KPMG.
Several U.S. pharmaceutical companies have communicated to shareholders that Covid-19 could hurt their ability to manufacture products or minimize their ability to attain Active Pharmaceutical Ingredients (APIs). The Food and Drug Administration says it is in contact with more than 180 drug manufacturing facilities, and as of Feb. 26 it had identified 20 products or APIs that are exclusively manufactured in China and could go into shortage.
How resilient is the U.S. manufacturing base? How quickly could U.S.-based manufacturers increase their production of APIs to meet domestic demand if China or India, or other countries, cease supplying the United States, particularly for drugs on the World Health Organization Essential Medicines list or a subset that is widely used by the U.S. population?
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