Global trade has fallen more than 4 per cent this quarter and is set to extend that loss as the coronavirus ravages supply chains.
Businesses with no backup plan have been hit hardest by the disruption to global supply chains, unable to quickly switch out suppliers and source goods.
“It is clear that the extended shutdown of parts of the world’s economy is now feeding through to impact supply chains as existing stocks are depleted,” said Mattias Hedwall, global chair of international commercial & trade at Baker McKenzie. “Businesses need to focus on how to minimise supply chain disruption and to adjust rapidly to a changing landscape.”
Global trade was already looking shaky prior to the coronavirus outbreak as the trend towards deglobalisation and rising protectionism hit shipping. But the coronavirus is exposing a global reliance on Chinese manufacturing that is now being felt acutely in developed economies.
Baker McKenzie also noted that companies that had diversified their supply chains were able to quickly move sourcing out of China in January and early February but have returned there in recent weeks, highlighting the need for stronger risk management in supply chain management.
Baker McKenzie anticipates more companies will digitalise their supply chain to achieve business resilience against another disruption, leveraging big data analytics and cloud computing to facilitate manager and supplier relationships.
“Companies with well-considered supply chain risk management processes will be better placed to identify the impact of disruptive events on their supply chain and product-offering, providing them with an opportunity to assess how to best respond in tough circumstances,” said Anne Petterd, technology communications and commercial partner at Baker McKenzie.