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Coronavirus: How Global Trade and Transportation Solutions Help Mitigate Supply Chain Impacts of COVID-19 

COVID-19 continues to disrupt the global supply chain. In this QAD Precision Report, Mark Gallivan looks at how automated trade and transportation solutions can help enterprises respond to sourcing challenges.

COVID-19, as the world is now discovering, is a blistering advocate in democratising pandemic fear. The virus has also caused an unparalleled upheaval for global businesses dependent on fragile supply chains. 

This Monday, the Dow Jones Industrial Average dived more than 1,000 points. Investors feared that COVID-19 will depress global economic growth, making Monday the worst day for the stock market in two years. Financial markets are likely to face additional pressure if the virus continues to proliferate. 

The Gaping Hole in the Supply Chain

The extension of the Chinese Lunar New Year holiday caused chaos for factories depending on components from Chinese factories. So much so that Jaguar Land Rover reportedly resorted to flying in parts from China in suitcases

COVID-19 is also impacting the consumer electronics industry.  Apple predicted global iPhone shortages and warned shareholders that revenues will be impacted. These are just two examples. Make no mistake, the world’s supply chain is reeling from the enforced shutdown by the Chinese authorities. 

A number of industries, including retail, pharma, heavy equipment manufacturers and, of course, the airline industry and shipping operations have all been negatively affected. 

Nobody should expect the Vietnamese to step up and fill the void – they simply cannot shore up the necessary manufacturing scale. As a result, the longer the COVID-19 crisis continues, the larger the gaping hole in the absent Chinese capacity will grow. 

A Lesson From History

Dean Cheng, the expert in Asian Studies at the Heritage Centre put it best: “Coronavirus [and the Trade War] is creating a double whammy in China. Watch companies relocating to factories outside China, leaving the original ones there. Diversification of parts for aerospace and auto parts [will result in] moving away from the workshop of the world to new regions.” There is a fundamentally good reasoning behind this — there was a warning from history. 

Back in 2011 the Tohoku earthquake rocked Japan to its very core. The 9.1 Mw undersea megathrust earthquake measures as the fourth most powerful earthquake since record keeping began in 1900. The devastation was profound. Reports suggest loss of life was upwards of 22,000 people from the destruction and ensuing tsunami. 

Carmakers were badly hit too. The single manufacturing plant that made the special pigment for car paint to shine shut down. The reason? Its location, close to the stricken Fukushima nuclear facility. The knock-on effect halted production lines at car global plants, leaving idle workers twiddling their thumbs and forced to go home. The tsunami turned the surrounding location into a twenty-first century Chernobyl no-go area. 

Today, a full nine years on, the hazardous decommissioning and clean-up at the Fukushima site continues at a slow pace. Back then, global manufacturers swore they would never find themselves so geographically exposed ever again. Nevertheless, it appears we have ignored this lesson. In 2003, China supplied 1 percent of parts to the world. Today, it hovers around 8 percent. 

Business As Usual?

What next? Irrespective of how far COVID-19 spreads, expect to see a shift in the business-as-usual supply chain locating and sourcing. While SARS and the 2011 earthquake and tsunami terrified the world, COVID-19 may prove the catalyst that begins the untethering of existing supply chains and the reshaping of globalization. Implementing a trade compliance and free trade agreement strategy will increasingly become essential for maximising protection and mitigating risks for companies scrambling for new supply chain partnerships outside of China and the surrounding territories.

How Automated Solutions Can Help

As you read this, global organisations are facing up the challenge of sourcing parts and components from different territories. To do this, the onus is forging new partnerships and alliances and quickly, magnifying corporate risk. 

TRADE COMPLIANCE

Technological solutions help mitigate regulatory risk and navigate delays. An automated trade compliance solution for vendor and trading partner screening speeds up this process. In addition, the solution should offer real-time operational analytics for compliance processing. This minimizes delays from transactions that are under review. Furthermore, the solution provider should offer daily updates of trade content changes. The added monitoring of permits that are close to their expiry dates also ensures no exposure to unforeseen fines.

TRANSPORTATION

Of course, once you have sourced goods and screened your trading partners, you might find that your existing transportation partners do not cover the necessary geography. Consequently, you may need to source goods on prepaid or delivered terms. As a result, you are likely to be paying a premium for transportation.

A global, multi carrier, multi-modal transportation execution solution to manage both inbound and outbound shipments has built-in redundancy, allowing you to quickly respond to these challenges.

FREE TRADE AGREEMENTS

Protecting a global business reputation is one thing — navigating  the myriad free trade agreements (FTAs) holds further challenges. 

For manufacturers, this necessitates the pulling of production bills of material (BOMs) and performing the respective calculation. The next hurdle occurs once the goods qualify — manufacturers must disseminate endless FTA certificates of origin and repeat this process umpteen times a year. 

If you are an importer, the first step is identifying new sources for parts in regions with pre-existing FTA agreements. This by itself is not enough — goods must be validated to ensure they qualify. When multiplied by thousands of goods, the challenge is enormous. Some organizations simply do not have the staff resources or internal expertise to take advantage of FTAs. That’s despite the fact that no company wants to bypass FTA savings when they are on the table. 

Automating this process allows companies to take advantage of FTAs and reduce duties while remaining compliant with thorny FTA regulatory challenges.

About QAD Precision – Trusted Global Trade and Transportation Execution

QAD Precision, a division of QAD Inc., provides industry-leading global trade compliance, and multi carrier transportation execution solutions from a single, integrated platform. An ISO-certified company, QAD Precision assists companies to streamline their import, export and transportation operations, optimize deliveries, and increase logistics ROI. QAD Precision’s scalable and extensible solution easily integrates with existing ERP and WMS solutions. Industry leaders in every region of the world rely on QAD Precision’s global support centers to leverage thousands of carrier services and manage millions of global trade and shipping transactions every day. For more information about QAD Precision, visit www.qadprecision.com.


 

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