Special thanks to Monique Giese, Frederick Hensel, Richard Lin, and Stefano Moritsch
One of the most prominent issues on the minds of boardroom executives right now, is supply chains. What was already a highly challenging situation due to the global COVID-19 pandemic has been dramatically accentuated by the conflict taking place in Ukraine and seismic geopolitical shifts, whose ramifications could be felt for decades.
COVID is not finished yet
Across industries and sectors, the disruptions caused by the COVID-19 pandemic created almost unprecedented challenges in the procurement, supply and distribution of goods and materials. Old and trusted pathways suddenly became beset by uncertainty and delay. Lockdowns and additional safety measures blocked off or significantly slowed down trading routes. The labor needed to keep supply chains running became a scarce commodity.
A mark of the size of the impact was visible in the KPMG CEO Outlook 2021, where supply chains were the joint number one risk on chief executive radars. In standard times, the supply chain was rarely mentioned – it was simply a given that the mechanisms were in place to deliver a regular and reliable supply of goods all along the value chain. The survey found that CEOs have been spurred to get on the front foot and bolster the resilience of their supply chains, with 67 percent saying they will increase investment in disruption detection and innovation processes.
The pandemic was terrible enough, but a whole new test has been layered on top through the war in Ukraine. No one knows how long it will last – but its ripple effects may be felt for a long time, no matter how short- or long-lived the military action itself proves.
We'll discuss Ukraine shortly – but before we get onto that, the first thing to note is that the effects of the pandemic aren't over yet. Supply chains are still very fragile as we emerge into the recovery. And in some parts of the world, COVID-19 is still a factor – most notably in China.
At the time of writing, there is a complete lockdown in force in Shanghai, and authorities are grappling with outbreaks in Beijing's capital. Before that, there was one in Shenzhen, a technology hub and home to the Port of Yantian, the fourth-largest container terminal in the world. China is fundamental as a driver of the global economy as a key producer and exporter of many goods and commodities. As it pursues its zero COVID approach, lockdowns could remain a feature for some time to come, clogging up the flow of goods into global supply chains and causing knock-on effects elsewhere – particularly in the chemicals and materials industry which supplies a myriad of products into downstream industries, many of which have seen factories closed recently due to the lockdowns. In short, COVID is still very much a reality that organizations have to deal with.