Survey on the Effects of COVID-19 on European Supply Chain

The Coronavirus disease (COVID-19) outbreak is a first and foremost tragedy, affecting hundreds of thousands of people. It’s set to have an intense impact, with far-reaching inference for the way people live and work across Europe and the globe. As per a survey conducted by the Institute for Supply Chain Management, it’s found that nearly 75% of companies reported supply chain disruptions due to the corona virus-related transportation restrictions, and the numeral is expected to increase further over the next few weeks.  The survey results note that almost one-half (47%) of respondents report induced revenue targets of 22% on average, with 36% reporting a 27% reduction, on average. However, few industries such as Food, beverage and tobacco manufacturing, wholesale trade, and management of companies and report services expect increasing revenue.

The majority reported that the demand for their products has decreased on average, 5%. Rigorous disruptions were being reported in North America with 9% for U.S. supply chains, 6% for supply chains elsewhere in North America, Japan and Korea (by 17% of respondents for each), Europe (by 24% of respondents) and mainly China (by 38% of respondents), by March-end. To address the coronavirus impacts, domestic and global companies are in the midst of rapid shifts in supply chain planning, operations, and inventory management. Even though they are adjusting to supply chain disruptions, the companies are expecting lower aggregate demand this year, which promises to be the most long-lasting impact of the virus outbreak.

The figures above serve to bring out the vulnerable state of global supply chains.

Supply chain risks amid the Coronavirus outbreak:

  • Lockdowns cause labor and supply shortages in factories
  • Regulatory uncertainty slows the restart of factory operations
  • Public health requirements impact industrial operations
  • Suppliers invoking force majeure clauses on the rise
  • Provincial border checks exacerbate trucking shortage
  • Restricted air and rail cargo capacity to increase prices
  • Closed borders delay movement from and to Vietnam and Hong Kong
  • Labor shortage causes congestion at airports and seaports
  • Ripple effects felt across supply chains overseas
  • Plain/vacant sailings reduce ocean freight capacity out of China

Supply chain bottlenecks

Companies find it hard to assemble products and to deliver them to their customers who have money are willing to pay the price demanded. However, a pandemic crisis impacts demand as well. According to the respondents, 57% of the German companies surveyed fear supply bottlenecks for auxiliary materials, preliminary products, and raw materials in the future. Despite the corona crisis, many international firms are still able to deliver and offer their services.

How to prepare your Supply Chain for Coronavirus

Let’s take a look at some of the actions that can be taken to mitigate the impacts of the crisis on supply chains.

  • Start with your people
  • Maintain a healthy skepticism
  • Run outage scenarios to assess the possibility of unforeseen impacts
  • Create a comprehensive, emergency operations center (EOC).

A survey found two-thirds of Chinese manufacturers, online and offline retailers and logistics services providers are already on 80% or more of their capacity. Meanwhile, nearly 60% of manufacturing companies mentioned that their upstream supply chain is almost back to normal. In the logistics sector, the figure was less, at 47% of logistics services providers.

Unsurprisingly, 83% of the companies said their supply chains need more flexibility to absorb shocks such as coronavirus. More than 90% of the companies said they want to reduce supply chain risks.