Restructuring Supply Chains In A Post-Covid World
The COVID-19 pandemic has been incredibly disruptive for all economies and industries around the world. In conjunction with a series of unfortunate events last year, the pandemic has made it essential for the logistics sector and global chemical companies to reconsider the issues of present patterns and processes of supply chains.
The Damages Done
The sequence of mishaps started in 2020 when a new strain of virus began to plague the world. By the middle of 2020, the virus had been declared a ‘global pandemic’ by the World Health Organization. Governments worldwide had begun to impose restrictive measures, including lockdowns in their attempts to contain the virus. The lockdowns had severe effects on both the domestic and international economy and trade. Trade and travel restrictions resulted in a significant slowdown of the global economy.
As governments issued export controls on a wide array of drugs and other intermediates, the pharmaceutical industry was affected. There was even an instance of the UK nearly running out of paracetamol as India restricted exports and China dried up. Today, the pharma shortages are severely impacting the production and distribution of the Covid-19 vaccines.
When the pandemic crisis deepened and nations began instituting lockdowns, supply chains started experiencing something they had never faced before: systemic demand shocks. People stocked up on consumer staples to comply with restrictions on movements, in some cases buying months’ worth of goods in a single day. The fault lines in domestic and international supply chains were unable to handle the increased demand. Subsequently, this led to the increase in prices of consumer goods and other fast-moving goods. The millions of containers used to ship personal protective equipment and other critical supplies worldwide never returned to the system.
The year also witnessed an unusual polar storm in North America that brought the petrochemical industry in the US gulf to a state of near-paralysis. Power companies’ decision to save money by not adequately winterizing the grid and policymakers disallowing links to neighboring state grids pushed the population into distress. The plastics and chemical supply companies were severely affected, with LyondellBasell highlighting that “the industry is unable to meet the existing level of demand.”
As if to top this off, the closing week of March 2021 witnessed an unfortunate obstruction of the Suez Canal, disrupting global maritime supply chains and confirming the problems associated with global supply chains.
It has now become unmistakably clear that the supply chain models in use now have stopped efficiently serving their purpose, bringing us to the point that structural changes to the system are long overdue. New business models need to be developed, with ample consideration given to reliable and local supply sources. In fact, businesses’ efforts to revamp the global supply chains had started long back, even before the pandemic hit.
However, the lethal combination of the global pandemic, the Texas storm, trade wars, and the Suez blockage has forced our hands and has necessitated a faster adoption of these changes. It is now an imperative that is essential to the survival of global trade to carefully analyze and restructure the supply chains and make them more resilient against unforeseeable catastrophes and disruptions.
In the context of change, the concept of ‘circular supply chain models’ is essential to consider. These models are a resilient alternative to traditional linear structures of supply chains and are, by design, more sustainable and waste-free. A circular supply chain is a supply chain centered around reusing its waste materials and its returns. The goal is to take these materials and returns and convert them into new products that can be sold again. The model is inherently ‘forward-thinking’ in its outcomes and also in its management. In essence, it marks a paradigm shift for supply chains.
A shift in which waste is traditionally understood no longer exists or is kept to a bare minimum, facilitating sustainability and resource efficiency. Moreover, the circular model has the potential to act as a robust buffer against potential supply shocks, making it a significant candidate as far as our search for alternative models of supply chains is concerned. Chemical manufacturers and distributors stand to gain by investing in the development of such a model.
The Way Forward
The developments of the past few years have exposed many vulnerabilities in supply chains and raised doubts about globalization and the resilience of international supply chains. The economic disruptions and unforeseen incidents behind them have to be considered “the new normal.” The logistic models and supply chains should be redesigned with enhanced durability, considering the potential fallouts of natural and artificial disasters and disruptive events. It is time to take up a new vision for the future of supply chains, one that leverages the present systems’ strengths while increasing resilience and sustainability and reduces the risks and vulnerabilities.