McKinsey&Company
How to relieve supply chain pain
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Mix things up. Diversifying global supply chains may be key to easing vulnerabilities that the COVID-19 pandemic exposed, according to research by the International Monetary Fund. If one big supplier runs short of labor, that can drop an economy’s output by nearly 1%. But greater diversification among source countries could cut global GDP losses by roughly half, to 0.4%, the IMF found. IMF’s model suggests that using more foreign inputs and being able to substitute inputs across suppliers can increase resilience to supply shocks. “Dismantling global value chains is not the answer,” the researchers stated. [Reuters] |
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Pain at the ports. Tight restrictions aimed at limiting COVID-19 transmission in China mean more lockdowns—and more supply chain constraints. Shanghai is the biggest container port in the world and has been locked down since late March. By one estimate, 30% of global shipping delays are originating in Asia. Those delays are massive: one in five cargo ships is stranded in a port somewhere in the world. The bottlenecks have a snowball effect, forcing cost increases for businesses and, analysts say, could further escalate inflation. [Fortune] |
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Under pressure. As global supply chains buckle under the weight of demand, transportation and logistics experts gathered at the UN’s 84th Inland Transport Committee meeting to parse the industry’s challenges. Speaking with McKinsey’s Tom Bartman, the executives noted three big challenges: global labor shortages (partially due to an aging workforce and limited engagement with young people), a lack of crucial equipment needed to decarbonize fleets, and the ripple effect of bottlenecks at crucial supply chain junctures.
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Logistics lifelines. These hurdles aren’t insurmountable, but they will require better visibility and coordination up and down the supply chain and for organizations to rethink priorities, the executives said. The panelists reviewed how companies are navigating the ongoing unpredictability and discussed options for greater involvement from public-sector actors, which could help to ease the strain. Watch the video for two critical things supply chain executives are doing to relieve disruptions in the supply chain.
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| — Edited by Sarah Thuerk |
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