Facilitated by this era of economic globalization and interconnectedness, the rapid spread of COVID-19 has posed an immense threat to people worldwide and impacted the global economy.

COVID-19 has caused tremendous disruption of the end-to-end global supply chain, said Nick Vyas, executive director of the Center for Global Supply Chain Management at the University of Southern California. Every product entails many phases of production before it reaches customers: raw materials, manufacturing, packaging, transportation and distribution. Each of these steps has its own complex global supply chain network, and removing just one of the nodes can impact the entire chain. Now that COVID-19 has turned into a pandemic, too many nodes have been affected, and there will be a significant impact on the world economy in the short term.

Global supply chains are getting increasingly complex and intertwined, said Benny Mantin, director and professor of the Luxembourg Centre for Logistics and Supply Chain Management. If global supply chains in the past could be seen as a pyramid of which the base corresponds to all raw material suppliers and the top is the consumer, now supply chains are so intertwined that it is more like a huge net where there are endless chains of interaction between suppliers and consumers. Given the increasing complexity of global supply chains, firms are often not fully aware of what is happening deep in their supply networks until a shock occurs, Mantin explained.

According to Geoffrey Gertz, a fellow in the Global Economy and Development program at the Brookings Institution, the topology of global supply chains (their shape, patterns and connections) will determine how global production responds to the shocks caused by COVID-19. Unfortunately, we have only limited knowledge of this topology. The real threat is that production shutdowns will reveal previously unknown choke points in global economic networks.

One lesson we can learn from COVID-19 is that a resilient, agile and reliable global supply chain network must be built from now on, Vyas said. Cost should not be the only consideration when companies establish their supply chains. Risk mitigation strategies are indispensable, and essential commodities should have multiple paths to markets. Today’s highly sophisticated supply chain network allows us to trim excess inventory and capacity, but this also decreases elasticity to market demand, leaving no room for disruption. We now live in an interdependent world, but despite that fact many still thought it was a country-specific issue and did not take preventive measures or make risk mitigation plans at the beginning of the COVID-19 outbreak.

Mantin recommended that governments and firms embrace resilient supply chain methods, such as dual sourcing and information sharing. More importantly, this is an opportunity to enhance supply chain transparency and track sourcing. Companies around the globe need to review their supply chain practices and policies, particularly with regard to lean supply chains and supply chain resilience, even if this will be a slow, long-term strategic process.

A unique aspect of the COVID-19 outbreak, as opposed to other shocks, is that it affects both the supply side as well as the demand side, Mantin noted. When there is such a two-sided impact, it is hard to predict how soon consumption and travel will rise back to normal levels. From a public health perspective, the key to containing and eliminating COVID-19 is for governments and health organizations to be transparent, share information and coordinate their actions.

(Edited and translated by Niu Xiaoqian, Weng Rong)