Covid-19

Managing Supply Chain Disruption in 2022

Managing Supply Chain Disruption in 2022

Firms started developing wide-ranging plans to more effectively become resilient. Locations that had been seen as highly desirable in a pre-pandemic situation started looking more fragile under heavy disruption. Having many just-in-time operations became more of a liability when logistics delays lengthened to weeks or even months. In response, some firms started developing action plans to near-shore or even re-shore some production. In some instances, these activities were already underway as the pandemic followed several years of highly disrupted trade, particularly during the height of the US-China trade war from 2018 onward. For most companies, however, heading in 2022, the actual changes made by firms to adjust to the pandemic has been considerably more modest than might have been assumed. Why? At least four reasons seem important. First, adjustments to supply chains can be quite expensive. At a time of widely fluctuating supply and demand projections, most companies did not want to deploy capital to actually change production or distribution locations. Many of the “resilient” suggestions can also involve substantial costs. Holding additional inventory can be expensive. Creating duplicate chains or even duplicate suppliers for critical parts can involve substantial additional costs. There are often sensible reasons for how a firm organized its supply chain in the first place.

Facilitating Trade: Vaccine Passports?

Facilitating Trade: Vaccine Passports?

International tourism is key to many economies around the world, accounting for over 10 percent of world GDP in 2019. But international travel is not just about beach vacations in Aruba. Business travel is essential to restarting the world economy. Facilitating travel for work is a clear reason to embrace the vaccine passport. Take, for example, the opening of a manufacturing plant. Such an endeavor requires highly skilled experts who may not necessarily live in-country. The type of engineering expertise needed to construct and kick off the operations of a high-tech factory is not always needed day-to-day – meaning in the pre-COVID world, the firm or industry relied on hassle-free international and inter-regional travel, allowing experts to work on-site for short periods. Now, a similar trip might require the traveler undergo two two-week hotel room quarantines on either end of the trip, making business travel much more expensive and inconvenient. In a 2020 paper, Harvard researchers set out to determine how much business travel benefits the global economy. Using their model, the researchers determined that the effects of reduced business travel are severe. If business travelers were forbidden from leaving South Korea alone, world GDP would fall by an estimated 0.95 percent – equivalent to nearly US$770 billion a year. In 2020, business travel fell by an estimated 54 percent, and expected to fall even further through 2021. To put it simply – the consequences of reduced business travel are huge. With governments nowhere near lifting entry restrictions and airlines not particularly keen on letting contagious passengers fly, the vaccine passport is an obvious solution to ease restrictions on international travel.