Impact of the Pandemic on the Global Supply Chain and Possible Consequences

Developments in transportation technologies have not only paved the way for the organization of production on a global scale, but also increased the rate of spread of epidemics. Thus, the disease can reach places far from its source and become a pandemic. The fact that a large number of malaria cases have been seen in places near international airports in England and the USA, and that 70% of the typhoid cases reported in the USA have a travel history are important examples of the pandemic-facilitating effect of transportation (Brower & Chalk, 2003, 15-16). Similarly, the fact that the COVID-19 cases hit Italy primarily in Europe was due to the fact that Italy is a central country in terms of touristic travels, as well as the delays in the country's measures. The first case in Italy was detected in two Chinese tourists in Rome on 31 January 2020, just one month after the date officially reported to the World Health Organization (31 December 2019) in China. The rapidity of the global spread of the pandemic is one of the most important features that distinguish it from other supply chain risks such as natural or non-natural (man-made) disasters (Ivanov, 2020, 9). This reduces the predictability of risk and makes it difficult to prevent supply chain disruptions.

With the outbreak of COVID-19, the first of the measures taken to prevent the spread of the pandemic was the suspension of transportation activities between countries. The effect of this situation on the functioning of global supply chains is that all kinds of corporate meetings, trainings and visits related to the organization of the supply chain are stopped indefinitely by many companies. Although developments in communication technologies will compensate for these deficiencies, activities in all other stages of the supply chain such as transportation capacity and time, customs clearance time, speed of processing activities and delivery time, especially the production of intermediate goods, parts, components or assembly products in the affected areas. It has not been possible to prevent its interruption or pause. This is exactly the source of the supply-side shock created by the pandemic on a world scale.

The Chinese New Year and the subsequent COVID-19 measures caused the production to stop in many cities, especially in Wuhan, in the Hubei province of China. Figure 1, created with the data of the supply chain risk audit company Resilinc, shows the industrial distribution of the top 1000 companies in the world and their suppliers' activities in quarantine areas. Accordingly, the total number of sub-supplier activities of these companies in quarantine places in China is 10447. 30 percent of these activities (3,238 units) are concentrated in high technology, semiconductor and consumer electronics products, while 26% (2730 units) are concentrated in automotive and heavy industry products. When the suppliers in the quarantine zones in Italy and South Korea are also included in the analysis, the total number of suppliers increases to 12097.

This situation has created a shock effect for international companies that have shifted many stages of their industrial production activities to the regions affected by the pandemic. Figure 2 shows the countries with which business activities in the affected areas are linked. Accordingly, more than half of the activities in the pandemic region have connections with the USA, France, Germany, Spain and England, which are the origin of international companies.