COVID-19 Coronavirus And Complex Supply Chains

The COVID-19 coronavirus has the world’s business system in a spin. Economists tend to downplay it as not terribly big in comparison to the huge global economy. For specific families, of course, it’s a tragedy. But the mild economic consequences of economists’ back-of-the-envelope economic analyses likely understate the magnitude of the harm to business activity.

Consider a variety of specifics, not because any one is large, but because taken together they highlight the world’s supply chains.

  • Bosch CEO Volkmar Denner said that he is concerned about the supply chain. China has the company’s largest number of employees after Germany.
  • “… all supply chains seem vulnerable because so many Chinese supply chains within supply chains within supply chains rely on each other for parts and raw materials. That tiny valve that is inside a motor that you are sourcing for your US-made product is made in China. So are the rare earth elements you require to manufacture magnets and electronics…and on and on. Purchasing departments declaring that they have alternate non-Chinese suppliers, may be naïve in thinking that their domestic suppliers don’t rely on parts from China and that shortages are eminent.” (Rosemary Coates, Executive Director of the Reshoring Institute and the President of Blue Silk Consulting, writing for Logistics Management.)
  • “From iPhones to LCD televisions, much of the world’s consumer technology is either made in China, or relies on parts made there. The nation is the world’s largest manufacturer of mobile phones, computers, and televisions. It exports billions of dollars of goods every year” wrote technology reporter Amrita Khalid in Quartz.

Earlier the Wall Street Journal reported that Airbus shut down a factory in China that accounted for 10% of production of its most popular jet; Hyundai idled all seven plants in South Korea for lack of parts from Chinese suppliers; and Tesla closed its Shanghai factory and warned of delivery delays.

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