With many countries closing their borders and imposing self-isolation measures amid the coronavirus pandemic, many supply chains immediately slowed to a crawl. How this will affect the future of supply chains, however, is not so clear cut.
The current challenges
Channel enterprises that rely on supply chains have no doubt faced their fair share of issues over the first few months of 2020 with the coronavirus pandemic disrupting a major player – China.
As the coronavirus has caused supply networks to freeze up, the implications spread further than simply the manufacturing giants like Foxconns and Winstrons, according to Stephanie Krishnan, research director for IDC Manufacturing Insights.
The impact can be felt throughout second and third tier suppliers, which are responsible for some vital elements in the process, such as subassembly, subcomponents, raw materials and even packaging, which can all prevent products from continuing through the supply chain.
Logistics have also been constrained, Krishnan continued, stemming from airport closures in China and impacted airlines like Qantas and Singapore Airlines, which have dropped approximately 96 per cent of flights.
“We are seeing this because the demand on air, which is the normal mode of transport for technology shipments, has been taken up by medical devices and medical equipment, especially PPE [personal protective equipment],” she said.
“As a result, the charges for air cargo went up 300 per cent in the first month. Now, they've gone through the roof, they're astronomical. You've got companies like DHL calling force majeure on their contracts which means that they can charge pretty much anything they want.
“Calling that actually frees them up to basically prioritise cargo based on medical need or food need, but as a result, anybody else that's trying to fly goods is going pay a hefty penalty as a result.”
The impact on air is also affecting the ability to charter aircraft, with Krishnan claiming that charter costs have ballooned from US$300,000 to a range of US$600,000 to US$800,000.
These supply chain constraints are not just broadly across the region but are being felt in Australia and New Zealand. Krishnan highlighted that Australia is heavily dependent on China for certain products and components, such as those used for telecommunication equipment and parts and computers.
This then is likely to ripple outward, having a knock-on effect on New Zealand.
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