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Close look: Global supply chains - What's the big story?

4 years ago
As economies, battered by the Covid-19 pandemic, dust themselves down and prepare to start again, we hear a good deal about disruption to global supply chains. We take a look at these chains. What are they and where are they going? Can they ever be rebuilt and how much should we want them to change?

The past four decades were the era of globalisation, when better transport links and lower tariff barriers encouraged easier trade across the world. This allowed a manufacturer in one country to source parts for their product in several other countries. And that has been great news for consumers. Technological developments have come faster and prices have been kept low.

As trade tensions simmered between the US and China in recent years, the complex networks that move components globally were challenged. President Trump re-imposed tariffs on some imports, determined to bring production home to America for the majority of components. And that even applied to giants of the American economy, such as the iPhone producer Apple.

The global pandemic caused what is technically known as a ‘supply shock’, taking disruption to a whole new level. Manufacturing facilities in China were shut down, starting with Hubei province. Supply chains in automotive, electronics and healthcare were hardest hit. And factories across the globe were forced to suspend operations too, for lack of parts. Meticulously created chains, based on years of co-operation and quality testing, simply snapped apart.

Resilience and diversification have become the new watchwords. Manufacturers are aiming to build in protection by broadening their supplier lists and even bringing production closer to market. But replacing the current system could take years to achieve and would likely prove costly. Consumer goods from cars to handsets might end up being less sophisticated and more expensive. And if economic lockdowns should ever be reimposed, the length of a supply chain could prove irrelevant once again.

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