Per Hong, partner with Kearney, assesses the impact to date of the Omicron variant of COVID-19, and speculates on how the current crisis will change global supply chains forever.
As the saying goes, a chain is only as strong as its weakest link, and when it comes to the current state of supply chains, “weakness is evident everywhere,” says Hong. Prior to the arrival of Omicron, there had been signs that some supply chain bottlenecks were beginning to clear up, but the new variant has presented global supply chains with yet another test of resilience.
The problems with ocean shipping, including soaring freight rates and tight capacity, are likely to persist through much of the coming year, and possibly into 2023. Much depends on actions of the Chinese government, which as of the new year had placed thousands of citizens under quarantine due to the Omicron outbreak, and was discouraging travel during the lunar new year break in February. Widescale shutdowns of Chinese factories are not yet evident, but such action would serve to further constrain supply lines and result in yet another wave of shortages of key products and manufacturing components.
The long-term question is whether supply chains will return to some semblance of normalcy when the virus disappears, or whether the crisis revealed deeper flaws that will continue to plague shippers and carriers in the years ahead.
Hong believes the pandemic will trigger some permanent changes in the design and execution of global supply chains, including a greater reliance on buffer stock and a shift in sourcing patterns away from China. The result could include some degree of reshoring manufacturing back to the U.S., but the ultimate solution to more resilient supply chains is likely to be a mixture of sourcing strategies.
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