As the COVID-19 delta variant spreads sickness, suffering and death around the world, it is also causing a wave of renewed disruptions to supply chains. Most impacted are Asian exporters such as China, Vietnam, and Malaysia where rigorous policies to contain any COVID-19 outbreaks are leading to factory and port shutdowns. In some countries, low vaccination rates are compounding the disruptions.
“A gap has formed between the demand for goods in the well vaccinated U.S. and the capacity of sparsely vaccinated manufacturing countries to meet it,” reported the Wall Street Journal on August 25. Outbreaks in Vietnam and other Asian countries are being met with strict quarantine and distancing policies to prevent the infections spreading. In early August, Chinese authorities shut down a shipping terminal at the port of Ningbo, cutting capacity by about 25% at the world’s third busiest port after a single dockworker contracted COVID. Also interrupted: flights from Ningbo to Beijing and all nightlife, movie theaters and gyms near the port district.
The Ningbo terminal was re-opened after about two weeks, but as occurred after previous COVID-related disruptions at busy Chinese ports, the cargo released from Ningbo simply added to port congestion and delays around the world.
Outbreaks of the delta variant are not only causing production and shipping delays for supply chains—they’re also bringing back the kind of topsy-turvy fluctuations in consumer purchasing behavior that upset demand forecasting early in the pandemic. The rise in COVID-19 cases caused by the delta variant “is our key global concern,” stated the Oxford Economics forecasting group recently as it downgraded its estimate for 2021 global GDP growth from 6.2% to 5.9%. “While the economic impact will be limited in some economies where immunity is high—from vaccination and prior infection—vaccine roll-out remains slow in many places [where] the spread of delta is more challenging.”
In China, the largest and fastest growing market for thousands of global companies, delta outbreaks and the government’s “zero-COVID” policies have “wrought havoc in recent weeks,” according to a September 1 report by CNN Business.
“The country’s worst coronavirus outbreak in a year spurred authorities to take dramatic measures to stop new infections, including locking down cities, canceling flights and suspending trade,” wrote CNN Business Asia Editor Jill Disis. “The aggressive and uncompromising strategy appears to have contained Delta—at the expense of economic activity.”
Delta outbreaks in Malaysia are exacerbating semiconductor shortages. The nation of 32 million has an assembly and testing industry that provides a vital link in the semiconductor value chains for makers of smartphones and other devices. According to the Wall Street Journal, Malaysia got a handle on delta outbreaks with strict lockdowns in early summer. It allowed electronics firms to operate at 60%, then at full capacity as vaccination rates increased. But disruptions continue. At least one company—Globetronics—shut down two factories in June after three workers tested positive. Although the hiatus was brief, it took the company four weeks to catch up with deliveries.
Malaysia had reached a vaccination rate of almost 50% by September 1. Other countries are far behind. Vietnam, for example, has only vaccinated about 3% of its 100 million people. A delta outbreak concentrated in Ho Chi Minh City is overloading hospitals and raising death rates. The U.S. and China have announced new donations totaling 3 million doses—but the country has a long, long way to go.
Vietnam is “a very good example of a country left behind when all the wealthier countries of the world grabbed the vaccines first,” said Dale Fisher of National University Hospital in Singapore, as reported by Reuters.
And while supply chain disruptions can’t be weighed on the same scale as human sickness and deaths, it is nonetheless the job of supply chain managers to respond to and plan for continuing delays and shortages arising from this new wave of the pandemic. And according to Resilinc CEO Bindiya Vakil, that requires grasping the reality that supply chains will never return to a pre-COVID status.
“It’s alarming to me when I hear executives talk as if they’re waiting for the post-COVID world,” she said in a recent webinar. “Smart supply chain strategists must prepare today for scenarios that assume the pre-COVID world is long gone.”
