What is the impact of COVID-19 on the supply chain?

COVID-19, on the other hand, has had a truly global impact, with many supply chains experiencing multiple fractures – at component suppliers, manufacturing sites, and in the “last mile” to the customer. It is difficult, if not impossible, for firms to maintain efficient supply chains while having redundancy across all of their operations. The-impact-of-COVID-on-supply-chains Jag Srai, Centre for International Manufacturing, IfM, investigates the most pressing global supply chain challenges as we prepare to vaccinate the world – and ride out the peaks and troughs of supply and demand as economies reopen. The global Coronavirus pandemic has put the modern global supply chain to the test like never before. Traditionally, supply chain resilience has been focused on protecting primarily against single point failures – for example, identifying a key component and dual sourcing to ensure continuous supply. Which makes it ironic that we are relying on a specific global supply chain – that of the COVID -19 vaccines – to get us out of the crisis. They have worked faster than ever before from the start of work on the vaccines to the release of the vaccines to the public. However, it is natural to anticipate that the actual journey from development to manufacturing to patient will be fraught with difficulties. We’ve seen obvious examples of this in the early months of the rollout, such as capacity expansion affecting vaccine supply in the short term. However, there are a number of stages in the vaccine supply chain that have the potential to cause disruption.

Vaccine supply chain challenges

The first step is to create a product. To be fully effective, all vaccines that have been approved for use, as well as the majority of those in development, require multiple doses. Others necessitate extremely cold supply chains. These product design considerations have had far-reaching consequences as health agencies and governments figure out the best way to distribute, administer, and schedule follow-up doses.
Manufacturing and distribution issues are perhaps the most visible disruptions to supply chains – but even here, many people have been caught off guard. A few months ago, the focus was on vaccine approvals, and few were discussing component supplies, such as a lack of glass vials to hold the doses. The discussion quickly shifted to vaccine production rates and how factory investments in capacity expansion necessitated a short-term postponement of deliveries.
As manufacturers allocate volumes to their various manufacturing sites, the issue of international distribution has become contentious – whether, with vaccine stock moving across borders despite insufficient local demand, national distribution will be prioritized based on price, contract timing, or need. Despite projections of a global production capacity of approximately two billion doses in 2021, it is unclear whether deliveries will keep pace with changing demand. New COVID-19 variants may have a significant impact on infection rates and severity, influencing vaccine rollout strategies and whether new vaccines are required. The-impact-of-COVID-on-supply-chains

Distribution and delivery

In terms of distribution, there were a number of, in retrospect, implausible reports about ex-factory shipments and air freight, including the notion that up to 8,000 jumbo jets would be required to deliver the vaccine around the world. This debate quickly cooled. Because airplanes are not single-use, and vaccines are constantly in production – not all of them are ready on Day 1 – these journeys take months rather than days.However, there were some initial concerns, such as the number of doses per vial, viable transport modes, and cold-chain requirements. These may appear to be obvious points, but they highlight the unprecedented nature of distribution on a truly global scale. These same issues arise at the point of delivery, as health-care providers strive to develop their own “last mile” capacity. There have been a number of options, such as using existing primary care networks versus establishing new centralized vaccine centers, or deciding on vaccine availability and which vaccine to deploy to which patient population (and hence, whether ultra-cold chain or other specialist supply chain logistics are needed). This ‘last mile’ design is critical because it became clear early on in the UK rollout that different regions were achieving very different vaccination rates due to product availability, priorities, and geography. It is complex, and it necessitates careful planning and governance, as well as adaptive delivery models capable of managing uncertainty in order to avoid wasting valuable time-critical stocks.

Adaptability is key

Many lessons have been drawn from recent global outbreaks of SARS, MERS, and Ebola. The Ebola vaccine, for example, required an ultra-cold chain (similar to the Pfizer/BioNTech COVID-19 vaccine, which must be stored at -7 C) and was effectively distributed across neighboring countries despite limited infrastructure. However, due to the global scope of COVID-19 and the specifics of its vaccines, we lack an essential ingredient of modern efficiency and supply chain management – data – for much of the supply chain. As a result, adaptability and visibility have become critical. It is impossible to see everything at the start of a process like this, so quickly evaluating the effectiveness of the supply chain at critical points upstream and downstream, as well as the flexibility to adapt when necessary, is critical. The UK government made an early decision to shift from distributing two doses of the vaccine at three-week intervals, as recommended by the manufacturer, to maximizing the number of people receiving the first dose of the vaccine. Leaving aside the medical arguments for this approach, adaptability to changing supply-demand scenarios will be an important feature in the future.

Planning on a global scale

Forward planning is the last component of a resilient supply chain. Many of the countries hardest hit by SARS, MERS, and Ebola have prioritized planning for the next pandemic and are better prepared to respond to COVID-19. Can countries that did not plan as thoroughly as others use the current experience to plan for the next? The-impact-of-COVID-on-supply-chains The issues here range from maintaining the manufacturing and distribution infrastructure after its original purpose has passed to analyzing bottlenecks in materials. For example, can the glass vials that caused the initial supply problem be standardised, and can more suppliers be incentivized to maintain capacity?
The mission to ‘vaccinate the world’ is just beginning – and all of these issues will continue to be in play as the rollout spreads across the globe.

The new supply chain landscape

So, how should businesses interpret this? While the vaccine will allow many economies to recover from lockdowns and a sharp drop in economic activity, the global picture is likely to remain uncertain for some time. Despite all of the supply issues, the vaccine does not have to worry about demand (on a global scale). In contrast, for many industries, the demand side will remain volatile, and may be the most disruptive factor in their supply chain. Companies in sectors where demand has collapsed will have to determine how much they expect purchasing behavior to return to pre-pandemic levels, and when they expect it to do so. Will, for example, the food service industry’s collapsed demand return to full strength? What about industries where consumers may have simply postponed purchases, such as automotive sales? Indeed, evidence from the United States suggests that there will be an early rebound in the United States as commuters abandon public transportation. There will be new sources of competition as well. Not everyone has suffered as a result of the COVID-19 downturn. Home furnishings and cleaning supplies have skyrocketed, while many other industries have been steadily declining. E-commerce has grown more quickly – many people who had never shopped online before or had only used online retail infrequently have moved their most frequent purchases, such as groceries, online. Many customers are unlikely to revert to their old habits. This was a pre-pandemic trend, but it is now a semi-permanent, accelerated shift. At the same time, these online retailers will have to guard against a “snap-back” or drop in demand if some of their customers return some of their business to brick-and-mortar stores. It is also important to remember that the international picture is mixed. For many months, the number of flights and passengers in China’s aerospace sector has been back at pre-pandemic levels, whereas in some Western economies, travel restrictions have reduced these to a small fraction of their 2019 levels. The-impact-of-COVID-on-supply-chains

Adopting flexible operating models

So, adaptability is the watchword. Where supply chains can adapt quickly, it will be critical for firms to maintain visibility of the evolving market demand and supply landscape in order to respond quickly. Sector-specific supply chains where inventory and stockpiling are not possible – for example, in the food sector or in cost-prohibitive, bespoke high-value products – will need to invest in agile, reconfigurable supply chains in particular. Advanced manufacturing and digital technologies and infrastructure, as well as digital platforms and their ability to mediate supply and demand, will be critical in manufacturing and supply. These will need to be combined with a flexible workforce and remote working, both of which are critical mechanisms for scaling up and down. This will necessitate innovation in operating and business models, which will be enabled by advanced manufacturing and digital technologies. For many, this means no return to “business as usual,” but there will be opportunities for those who can adapt and navigate the uncertainty. Related Article: