Chain Reaction: Global Supply Chain Issues Cause Havoc​

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By Alison Catchpole​


The Story

“The supply shock that started in China [...] and the demand shock that followed as the global economy shut down exposed vulnerabilities in the production strategies and supply chains of firms just about everywhere”.

So said a Harvard Business Review article published in October 2020. A year on, and the spread of the Delta variant has pushed many parts of the world back into lockdown, or at least further back on the road to recovery. From the McDonald’s milkshake deficit to the Wetherspoons toast and lager crisis (The Guardian), the triple whammy of supply chain issues, a staffing crisis and – in the UK at least – Brexit-related changes, is hitting hard.

94% of Fortune 1000 companies are seeing supply chain disruptions from Covid-19 (Accenture) - not just in the food and beverage sectors. A global shortage of microchips is partially a result of lockdowns in Thailand, Malaysia and Vietnam - and is having widespread impact. The world’s largest carmaker by sales volume, Toyota, cut its annual production target by 3% in the wake of Covid-19 related supply chain issues. This downgrade followed a move by the company to reduce global production by 40% in September (Financial Times).

The Background

Whilst visiting Singapore in late August, US Vice President Kamala Harris pledged to “partner to increase the capacity of South-East Asia to identify new Covid-19 variants and boost regional preparedness” (Reuters). This may go some way to easing the pressure on industries from cars to computers. However, supply constraints threaten to worsen the UK economy, with Brexit allegedly doubling the UK’s reliance on Chinese imports (Financial Times).

Transport logistics have also been under the spotlight recently - with the Suez Canal blockage in March 2021 highlighting the fragility and time-sensitivity of global transport. The Financial Times estimates the price of moving goods for businesses as up to ten times higher than this time last year. In Britain, a backlog in recent qualification testing, alongside losing migrant drivers due to Brexit and the pandemic, has led to a deficit of around 100,000 lorry drivers (Road Haulage Association).

‘Just In Time’ (JIT) supply chains were largely developed in the 1970s and 80s, pioneered by industrial engineer and Toyota executive Taiichi Ohno. Considered as a management philosophy rather than a specific technique, JIT has become synonymous with minimising waste (Cambridge Institute for Manufacturing). But as noted by supply chain professor Nada Sanders, “as customers demand ever-cheaper products delivered faster, supply chains have given up every bit of slack” (The Conversation).

What It Means For Businesses And Law Firms

With complex supply chains unsteady in the unpredictable world of 2021, delays are commonplace – and as a result businesses might find themselves in disputes over contract breaches.

The development of much-needed resilience in supply chain management could be a silver lining to come out of the current crisis. Accenture list three planning issues as: involving digital to unlock data; rethinking the operating model; and building an asset-light network. These and other changes, including an increase in flexibility, greater transparency, and greater support for the physical and mental wellbeing of the workforce, could be the dynamic changes needed for supply chains to adapt to a post-Brexit, post-pandemic world.