Essay Sample on COVID-19 Pandemic Disrupts Global Supply Chain and Trade

Introduction

The rapid geographical spread of COVID-19 and the high rates of infection have disrupted the global economy. The condition has not only led to a worldwide health crisis but also has affected financial markets, supply chain, and international trade (Parsons, 20200). A significant disruption to the supply chain has been the most immediate commercial impact of the COVID-19 disease. This disease has resulted in a shut-down of factories' plants, has disrupted raw materials production, shipping, and the entire supply chain (Choi et al., 2020).

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One of the most critical parts of a business is the supply chain. It refers to the entire system of production and delivery of products and services, covering the initial stages of gathering the raw materials to the service or product delivery (Sarkar, 2017). This process entails various procedures, resources, information, entities, and people. The phases it takes to get a service or product from its initial state to the end-user are also represented in the supply chain (Mille, 2020).

Steps involved in the supply chain include the distribution of products to the end-user, transporting products, and converting and distributing raw constituents into end foods (Sarkar, 2017). "Individuals involved in the supply chain process comprise retailers, distribution centers, transportation companies, warehouses, vendors, and producers" (Sarkar, 2017).

This essay elaborates on the interruptions initiated by COVID-19 to the supply chain, including effects related to the food supply, medical equipment needs, and the overall impact on the supply chain transportation. This essay analyses the disruption the disease has caused on the following key areas:

• The shipping industry
• Medical equipment supply
• Production of raw material
• Food supply
• The manufacturing sector

The Global Shipping Industry

The Coronavirus disease has already disrupted the shipping sector of global trade in various ways, therefore adversely affecting the industrial sector. The shipping industry has seen a significant impact on transport operations, resulting in a decline in global trade activities across the world in terms of addressing the effects (Leonard, 2020). The pandemic has caused a collapse in demand for goods, which has resulted in a ripple outcome on the shipping industry (Choi et al., 2020).

The pandemic has also hit courier service providers. As a result of government restrictions, DHL, FedEx, and UPS have all reported numerous delays on most routes, and route suspensions - comprising of countries like India (Berti, 2020).

The maritime shipping sector has also not been left out. Consequently, the marine shipping industry has been adversely affected, as countries put in place tough policies against the disease and hence experiencing a drop in demand. Amidst the decline in the ratio of supply and demand, most of the logistics service providers have scaled down their operations. The container shipping industry is among them, operating at a low level as (Plume, 2020).

The Republic of China, where the virus originated, is among the main players in global. The country is home to the most important and busiest shipping container ports in the world (Berti, 2020). Due to the stringent measures taken by the Chinese government, massive trade activities such as the Yangtze and Shanghai ports have been disrupted by the novel Coronavirus on a large scale.

Quarantine measures to limit the outbreak impact has resulted in the restriction of entry and exit of ships in several ports. Some of the leading logistics and trade shipping companies have now recalled their shipping activities. Some countries like Australia and Singapore have restricted ships from entering into their port facilities (Plume, 2020). This has negatively affected maritime shipping. The United States has implemented strict policies regarding port activities. These disruptions in global shipping have resulted in an overall decline in the supply chain sector.

Medical Equipment Supply

The regulation of the movement of medical products from manufacturers to patients is referred to as healthcare supply chain management (LaPointe, 2020). Handling the supply chain in healthcare is a substantially scrappy and complex process, the process includes the procurement of resources, management of supplies, and delivery of products to consumers within the health sector (Balfour, 2020). Completing the process requires healthcare product information and physical goods to go through various autonomous participants, including regulatory agencies, purchasing organization groups, providers, hospitals, insurance companies, and manufacturers. With concerns rising about the disruptions COVID- 19 has caused to the supply chain, and the Medical Equipment Supply is among the subsections of the supply chain to be troubled.

China is one of the largest pharmaceutical product suppliers in the world (Balfour, 2020). Supply from Chinese healthcare manufacturing plants has reduced since the imposition of lockdowns in the country. This is because a large number of the Chinese labor force has been ordered to stay at home.

Also, generic drug-producing manufacturers who source APIs from China have been facing a supply chain issue since the beginning of the outbreak. As a result, shortages affecting several products have been declared by the United States Food and Drug Administration (FDA) body (LaPointe, 2020).

Another disruption caused by the spread of COVID-19 is the restriction of the export of pharmaceutical manufacturers by the government of India. The government of India has constrained the export of active pharmaceutical ingredient products (about 26), which is equivalent to roughly 10% of the country's export volume, according to Food and Drug Administration body Representative Stephen Hahn. Representing a global generics supply of 20 percent, the verdict of restricting export to other countries is as a result of fears that an internal supply shortage could have far-reaching effects, particularly on supply and availability of pharmaceutical drugs like the hormone progesterone, antibiotics like erythromycin and tinidazole, paracetamol, and vitamin B12. (Balfour, 2020).

The reason the restrictions were imposed is that drug manufacturers in India rely greatly on APIs imports from China; hence the disease has greatly affected the manufacture and delivery of pharmaceutical products.

Production of Raw Materials

The coronavirus pandemic has adversely affected the production of raw materials, from farming produce to mining. The decline in the supply of these materials is driven by supplier delivery restrictions, insufficient backlog, and a lack of new orders (Jones et al., 2020). These factors have led to the reduction of output in the production sector. Another risk caused by the disease is the delay in the transport of components and raw materials.

As a result of quarantine and transportation restriction measures, the speed of customs clearance and shipping of domestic raw materials is affected (Jones et al., 2020). And this has led to a rise in the price of raw materials, hence tightening the supply chain. Manufacturers are facing the risk of high inventory backlog resulting from the weakening of end-user demands.

Since trade is not fully functioning, farm products such as palm oil, maize, and Soybeans have become limited. Fodder production and biofuels are the most important uses of these commodities. Reduction in global trade leads to a scarcity in supply, which drives up the prices of commodities.

The spread of Covid-19 has also directly hit the mining sector, resulting in low prices of minerals. Government regulations in Mongolia Rio Tinto have forced suspension of mining operations in the country (Cantore, 2020). Mining personnel in Chile, Ghana, and Burkina Faso have tested positive on the virus - which is more likely to bring further challenges in the industry. In South Africa, several mining operations have been shut-down, which might result in extra costs in re-opening the mining sites in the prospect (Cantore, 2020). These drastic price drops, reduced share prices, and activities across the mining sector pinpoint potential catastrophes on the supply in the mining industry.

The Manufacturing Sector

Lockdowns in countries such as Italy and China have been as a result of a continuous spread of COVID-19. These partial lockdowns adversely affected the global supply chain. Since 2009, China has stood out as the largest exporter in the world, exporting $2.7 trillion in 2018, an amount which was approximated to be 10.8percent of the total exports in the world (Cantore, 2020). In the first two months of 2020, China experienced a reduction of 13.5 percent in its manufacturing production (Jones et al., 2020). Several manufacturing plants and retailers may be forced to suspend operations as a result of global supply chain disruption and input shortages.

Apart from being the leading exporter globally, China is among the main importers of services and goods, representing 11.4percent of the total imports in the world (Cantore, 2020). Therefore, entry and exit restrictions into the countries ports led to a disruption in the supply of production raw materials

Manufacturing production in third world countries is affected by COVID-19 because of the decreasing demand in raw materials from high-income countries, disruption in value chains from industrially advanced nations, policies such as restriction of shipment of goods, and financial constraints (Cantore, 2020).

According to Cantore (2020), an estimated decline of $50 billion in the manufacturing sector happened in February 2020. Third world countries that sell raw materials to developed countries will experience intensive negative economic effects. Workers in the third world countries are expected to be hit by the crisis.

Food Supply

The current shortage in food supply among retail outlets is as a result of the acceleration in the spread of the coronavirus pandemic. In the United States, disruptions in the manufacturing and delivery of products like pork have been witnessed. The rising number of workers falling ill of the COVID-19 has led to a strain in the food supply chain. Affected sectors in the United States include grocery stores, warehouses, and meat processing plants (BBC News, 2020).

Smithfield Foods was shut down following a total of 230 workers becoming ill with the virus. The company announced it would close its processing firm in Sioux Falls, SD, a processing plant that is known to be producing over 5% of the United States total pork. Businesses have been shut in the restaurant and hospitality industry, which has impacted the food production sector since stocking too much could lead to wastes (Corkery & Yaffe-Bellany, 2020).

The pandemic has also affected the global workforce. In the United States, workers becoming sick has resulted in shut down of meat processing factories (Corkery & Yaffe-Bellany, 2020). Staffing shortages have led to farmers encountering challenges in the labour force. The international labour force has been affected by national lockdowns, social distancing, and self-isolation guidelines (Forde, 2020).

The closure of coffee shops in several countries has led to an oversupply in milk. Estimates in the United States indicate that a total of 14 million litres of milk go into waste every day. The disruption of supply routes has mainly contributed to these challenges. This has also affected the UK and other regions (BBC News, 2020).