The Recent Trends in US Services Trade: 2023 Annual Report from the International Trade Commission (ITC) explores the impact of the Covid-19 pandemic on global supply chains.
The report points out that pandemic-related supply distortions were costly for global retailers with losses due to inventory distortions estimated to total $580bn in 2020. Costs to global retail supply chain operators and manufacturers were estimated to total $1.2 trillion in 2020.
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The report noted that the demand shifts, supply constraints, and transportation bottlenecks caused by Covid-19-pandemic-related disruptions were the “most dramatic stress test of the past 75 years” for global supply chains and exposed the fragility and limits of the global supply system. According to a survey of global retail executives, the revenues of 94% of US retail firms were negatively impacted by the pandemic, the report reads.
US firms reliant on global suppliers for inputs and finished products were the worst hit since US apparel retailers source around 90% of their products from abroad.
“Analysis of supply chains since the onset of Covid-19 pandemic has suggested diversifying supply is critical for retailers,” the report reads. “Retail analysts are pointing out the benefits of multisourcing and identifying alternative supply to broaden supply bases, transport, and logistics providers, to increase resiliency.
“The advantages of balancing production with consumption regionally include shorter supply lines and transportation times, lower shipping costs, and more predictable political environments. A 2021 survey of supply chain professionals indicated that 88% of US SME retailers are shifting or plan to shift at least a portion of their supply to the United States.”
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By GlobalDataThe report points out that for certain sectors like textiles, sourcing is “relatively easy to move” with alternatives to China “numerous” and including other Asian countries such as India and Pakistan and Latin American countries such as Mexico.
But certain manufacturing centres that supply retailers are much more difficult and expensive to relocate. This includes electronics production where China has a well-developed assembly infrastructure that cannot be easily set up in other countries. According to a study by Bank of America, shifting all export-related manufacturing that is not destined for Chinese consumption out of China would cost US and European firms $1 trillion dollars.
The report notes that pandemic-related disruptions also highlighted a lack of transparency between retailers and suppliers.
“Analysis since the onset of the pandemic has suggested that having closer and more direct relationships with suppliers enables retailers to better understand and plan for bottlenecks and potential supply vulnerabilities.
“Technology is a critical tool for increasing communication across the supply chain and growing supply resiliency. More specifically, the increased use of digital supply chain management technologies—including blockchain, fifth generation (5G), and artificial intelligence (AI)—is assisting retailers with end-to-end information flows and boosting collaboration and information sharing throughout the supply chain.
“According to a 2020 survey, 50% of retail firms added new supply chain analytics in 2020 in response to disruptions. In the same survey, 86% of retail firms planned investment in supply chain digital technology in 2021 and future years.”
