MS Maersk Elba container ship.
In an increasingly globalized world, global supply chains are very susceptible to breakages. Many countries, including the United States, are extremely reliant on foreign countries for supplies and resources. Throughout the past month, the global economy has halted to a virtual standstill. Business has stopped, people have stopped going to work, and the general economy has frozen in its tracks. Because of this, many are rushing to purchase the necessary groceries to survive: food, water, and other items that many find as a necessity. With the global economy in a frenzy, the problems involved with COVID-19 have all but halted production in factories. In turn, the supply chain has been broken at many different parts of the chain, increasing costs as a result of supply and demand. Necessary items such as hand soap, for example, have seen tariffs as high as 17%, evidence of the tightly interlocked economy.
The halting of the global supply chain has severely impacted local businesses. A large multitude of local shops, restaurants and businesses that were once able to provide their services because of supply chains in the global economy are now unable to function because of the current global economic downturn.
Along with the loss of products along the supply chain, as many as 450 million workers worldwide have been exposed to the realities of COVID-19. For safety reasons, many of these workers have been paid a severance from their home quarters or simply fired for a lack of business. Either way, the pandemic has severely exposed the vulnerability of modern supply lines and how susceptible they can be to epidemics, blockages, and universal problems that may affect the outlook of economic activity.
In light of this, many have pondered the idea of localization — production at a more local level rather than globalized level. Supporting local business and culture over foreign direct investment and competitive wages overseas, localization could potentially minimize the disruption of supply chains. The theory behind more localized production is vital in regards to assuring the steadfast nature of supply lines, along with boosting economic prosperity in one’s homeland rather than off-shore.
The longer supply chains in the status quo are more vulnerable to breakage and disruption. With a notable decrease in workers in the factories due to COVID-19 and less workers transporting goods, there is a shortage of products that can flow from country to country, which has significant ripple effects down the line. On the other hand, if supply chains have much smaller distances to travel, then there is an exponentially smaller window of breakage in the supply line. If products were readily made in the United States, then there would be less of a reliance on foreign countries’ chains of supply, which means a smaller chance of supply chain disruption, simply because there would be less places where the supply chain could be interrupted.
Although localization has its theoretical benefits, the globalized supply chain has nonetheless benefitted the world during COVID-19. Modern supply chains have allowed masks and respirators to be shared amongst nations, and the automation of supply lines, which is immune to organic diseases, may also be somewhat immune to a blockage in worker productivity.
The challenges and impacts of COVID-19 have undoubtedly brought the complex system of globalized supply chains into the realm of public scrutiny. Whatever the outcome, this is an appropriate time for communities around the globe to take a step back and reevaluate the role that such interconnectedness plays in our societies, as well as its advantages and disadvantages to nations across the world.