- The coronavirus crisis has revealed the fragility of the modern supply chain.
- Recent data shows the devastating economic impact as week-on-week trade in China, the US and Europe halved because of the crisis.
- Diverse sourcing and digitization will be the key to building stronger, smarter supply chains and ensuring a lasting recovery.
The United States, United Kingdom, and Europe followed suit, with a combined initial drop of 26% in the beginning of April, and a continuing decline of 17% in late April. According to Tradeshift’s data, businesses took an average of 36.7 days to settle an invoice in 2019, compared to 36.8 days in 2018. In the first quarter of 2020, average payment terms have risen 1.7% to 37.4 days.Secondly, the lack of orders going through the supply chain is building up to another tidal wave with new orders slowing and invoices dropping off. Although governments and central banks have reacted with impressive speed to inject liquidity into the system, the efficacy of such measures are fading. For a growing number of multinational companies, the reality of the crisis presents an increasingly stark choice between self-preservation and supplier solvency.This is particularly true in the healthcare sector, where the scramble for protective equipment has laid bare the inherent risks of inventory and single-sourcing models driven exclusively by cost control.One likely consequence is that global firms will diversify their supply chains in the future, instead of relying only on China. Manufacturing hubs such as Vietnam, Mexico, and India are likely to benefit from that shift.This trend grew with the likes of automation and small batch production, which had become so cheap that a number of countries started moving portions of their supply chain back home.