Industries see need to maintain large supply chains as virus spreads globally

MANILA, Philippines — As the spread of the novel coronavirus (COVID-19) exposes vulnerability in global supply chains, industries may evaluate the need to maintain large and complex ones, turning instead to technology to re-shore some operations, said London-based think tank Capital Economics.

In his chief economist note titled “Counting the long-term cost of the coronavirus,” Neil Shearing said the extent of disruption caused by the virus will likely make global businesses more attuned to the affects of future pandemics to doing business through supply chains across countries.

“One plausible consequence is that it could accelerate the process of deglobalization that is already spreading through the world economy,” he said.

“A more immediate way which the crisis could accelerate the process of de-globalization is by adding to a growing pushback against large and complex supply chains,” he said.

Alongside the continued onslaught of COVID-19, global events like the US-China trade war and Brexit have so far been contributing to the erosion of the idea that free trade should continue to be a pillar of the global economy.

At the same time, frontier technologies like 3D printing have enabled the re-shoring of some aspects of manufacturing that were previously outsourced to emerging economies.

“Both factors seem likely, in our view, to cause an increasing number of firms to question the benefits of maintaining large supply chains,” said Shearing.

While it may be difficult to predict how COVID-19 will continue to affect the global economy in the coming months, Capital Economics said governments worldwide may already be adding global pandemics to the list of factors that threaten globalization and their individual economies.

“It’s difficult to judge how the economic effects of the virus will play out over the next ten days, let alone the next ten years. But it’s possible that, to policy and technology, we may soon have to add the threat of global pandemics to the list of factors threatening the future of globalization,” Shearing said.