Will COVID-19 Change Global Supply Chains?

The coronavirus may drive a shift in global manufacturing that will be sustained for the foreseeable future. The virus has shown the vulnerability of global supply chains. Manufacturing facilities across Asia, Europe, and the US have curtailed operations or closed due to an interruption in their supply chain, i.e., not receiving essential products or parts used in their processes.

• The reasons for the shift out of China of some production:

• Technology is enabling more output with fewer people,

• Companies are looking to bring production closer to home so that they are more flexible and responsive to markets and

• The US-China trade war.

• Over the past year, due to the US-China conflict, companies that produce or source in China may want to reduce their vulnerability to political strife and tariffs. Reducing their purchasing or production in China is one way to step out of the line of fire and allow them to control costs more closely.

So far, Southeast Asia, Vietnam, Malaysia, the Philippines, India, Mexico, and the US have been the top beneficiaries of this shift.

As companies reconsider their growth strategies, we can expect a more diverse global map, where the benefits of manufacturing and the employment it brings will be more widely and evenly distributed.