Virus spreads in global supply chain

China is the biggest consumer market with its almost 1,4 billion inhabitants and it is also a kind of factory in the world, fully inserted in the global supply chain. In 2018, the Asian country exported more than US$2,5 trillion, almost twice as much as the second place, the United States (US$1,7 trillion). Naturally, being the largest consumer market and the largest exporter, its ports are among the main container handling on the planet, occupying 7 of the top 10 positions, with the port of Shanghai handling more than 2018 million TEUs in 40.

But an organism of microscopic size begins to affect this productive machine and, consequently, already causes problems in a good part of the global supply chains. In an attempt to contain the coronavirus epidemic, the Chinese government, and the industries themselves, are interrupting operations to avoid the concentration of large groups of people and possible contagion. The result is that already lack of raw material for some sectors and Ship contracting at major Chinese ports fell 20% in January according to an article in the newspaper Valor Econômico.

This is one of the risks of investing in a global supply chain. Even thousands of kilometers away, a company's production can be seriously affected by a problem that, at first, would be just local and irrelevant to it. More than 16 kilometers from the province of Wuhan, in China, Motorola in Brazil reported the possibility of stopping its factory in São Paulo due to lack of raw material, and the same could happen with Samsung. In the United States and Europe, vehicle manufacturers also admit the possibility of closing plants.

In the Brazilian case, the lower efficiency of logistics in the country has even been beneficial, as it ends up leading companies to have larger inventories, which has postponed the possible effects of the lack of raw materials.

On the other hand, in countries with efficient transport infrastructure and less bureaucracy, just-in-time supply chains are at serious risk of disruption. The lack of predictability regarding the duration of this crisis ends up leading companies to rethink the dates for future launches. Although not officially announced, there was a possibility that Apple will launch a cheaper iPhone model in the first quarter, a launch that may be delayed due to production stoppages.

By the way, this is not the first time that Apple, whose headquarters are in California (USA), has suffered from problems originating from its globalized supply chain. The trade crisis between the United States and China had an impact on the costs of its items produced in the Asian country, which has led the US company to evaluate the possibility of taking part of its production to factories in other countries.

And you, has your company's operation been hampered by the coronavirus?