As part of the effects of Covid-19, companies globally assess their supply chains broadly, according to DHL and the New York University Stern Scholl of Business.
These supply chains are complex and can fail for a variety of reasons, including, for example, not providing adequate quality control and/or quality assurance in supply chain systems and processes, a lack of coordination between various aspects of the supply chain, logistics provider failures, and improper inventory management and/or order handling.
The October 2020 forecast from the World Trade Organization (WTO) indicated that all geographic regions could experience a drop in trade volumes, while North America and Europe could see a double-digit drop in trade volumes.
The forecast also projected that sectors with extensive value chains, such as automotive products and electronics, could experience the steepest declines.
Although services were not included in the WTO forecasts, this segment of the economy could experience the greatest disturbance as a result of travel and transportation restrictions and the closure of retail and hotel establishments.
However, according to an analysis by the US Congress, services such as information technology were growing to meet the demands of employees working from home.
At the same time, the pandemic raised questions about the costs and benefits of the global supply chains that companies have built over the past three decades.
Evidence indicates that growth in supply chains had slowed before the pandemic, but there is little consensus on the long-term impact of the crisis.
According to a December 2020 report by DHL and the New York University Stern Scholl of Business, global interconnection comprises four different types of transactions: commerce, capital, information, and people.
This analysis concluded that the pandemic affected cross-border movements of people in response to travel and trade restrictions through a sharp contraction in the global economy.
Capital flows also declined during 2020 as a result of lower corporate profits, business travel restrictions, negative business outlook and concerns about global supply chains.
In some cases, companies have been reassessing their exposure to risks posed by extensive supply chains that are potentially vulnerable to numerous disruption points.
In addition, some governments have been assessing the risks that supply chains pose to the domestic supply of items deemed important to national security as a result of companies’ location or relocation of production abroad.
For multinational companies, changing suppliers and production locations can be especially costly for some companies and may present additional risks.
Thus, in accordance with the WTO, the business landscape is changing rapidly and, in many respects, discontinuously.
Supply chains face major disruptions in the markets where they operate and a tipping point for sources of value and growth.