How to Navigate a Crisis in the Global Supply Chain



Introduction

The covid pandemic has impacted the procurement in China and the lack of containers. With the threat of this virus looming, many companies are opting to do their business elsewhere. As a result, there is a surplus of containers which will soon reach critical levels if this trend continues. The issue is how to keep up with demand while minimizing costs and maximizing efficiency. There are three options: 1) increase production capacity; 2) build new facilities; or 3) use containers from other sources such as Canada or Mexico.


 

1. The covid pandemic has impacted the procurement in China and the lake of containers

China and the Lake of Containers

The covid pandemic has had a huge impact on the procurement in China and the Lake of Containers. There is a surplus of containers at ports, which will soon reach critical levels if this trend continues.

China's trend of import substitution has been cited as one of the leading causes of the Lake of Containers. Restrictions on imports have caused businesses to turn to local manufacturers, which in turn has reduced the number of containers coming into China.


Shipment companies are also being impacted by the virus as they are having an increasingly difficult time getting containers offloaded at ports around the world.

The result is an overabundance of inventory at ports around the world, slowing down trade significantly. This problem has been exacerbated by China's reliance on sea cargo as opposed to rail-based transport.


2. With the threat of this virus looming, many companies are opting to do their business elsewhere

Among the most impacted industries by the virus has been the manufacturing sector in China. It is anticipated that with how bad things are getting, if this continues for another year, there will be an overabundance of containers at ports around the world. That is one of the major reasons why many companies are looking to do business elsewhere. The cost of a container has a significant impact on client's procurement decisions as it has been multiplied by 5.

The cost increase for these containers will have a significant impact on procurement decisions, especially in the manufacturing industry.

There has also been an increase in companies looking for greener methods of doing business or even holding off on production entirely. Many are turning to local markets to temporarily skip the huge increase in transportation costs that will affect the end price of production significantly.


There has also been a rise in companies looking for new ways of being more sustainable. They are opting for greener methods of doing business or even holding off on production entirely.


3. At issue is how to keep up with demand while minimizing costs and maximizing efficiency

The two main areas that are jeopardized by the current crisis in the global supply chain is China and containers. Due to the threat of the covid pandemic, companies are opting out of China as a manufacturing location. This has lead to a surplus of containers, which will soon reach critical levels if this trend continues.

No one knows for sure how to solve this crisis but here are some possible ways:

- Companies could start using more 3rd party servicers to manage inventory and consolidate shipments from different locations

- Companies could try sourcing from other countries that are less affected by the virus

- Companies could start investing in alternative options to containers, such as bulk shipping or air cargo


4. China will remain the main sourcing of supply for most companies in the world and shifting to other production site is not that easy

China will remain the main sourcing of supply for most companies in the world, even though there are other choices. Shifting to other production sites is not that easy because it would require a lot of resources and time.

China has long been the go-to country for manufacturing. The good manufacturing equipment tools rate in China is one of the major reasons for this. This means that sourcing can happen quickly and with few hiccups. It also means that many companies are still opting to do their business in China even though there are other choices available to them.

All companies want to have the flexibility to produce globally but only few countries have been able to get a qualified workload with a good equipment rate. This means that most of the companies will have to stick with China for now.


 

Conclusion

The covid pandemic has impacted the procurement in China and as a result, there is a surplus of containers. Many companies are opting to do their business elsewhere but because it's not that easy, many will still have to stick with China for now.