COVID-19 has thrown a planetary-scale spanner in the works of our global supply chains. In this Research Short, we’ll explore some of the cascading causes, effects and vulnerabilities present in our strained global logistical networks — and what it might mean for the future of moving goods.

This is the first edition of ‘Viral Mobilities’ — a series of Research Shorts exploring the emerging impacts (and opportunities) of a COVID-affected world of mobility. ‘Research Shorts’ is our format for experimenting with ways of translating deep research into shorter, sharper and more engaging mediums.

1. Pre-existing fragilities

   For years, supply chain managers have followed a policy of efficiency over resilience, pursuing highly-profitable (but equally-risky) strategies like the offshoring of manufacturing to low-cost regions and lean, just-in-time production. This sacrifice of long-term resilience in favor of short-term profitability has set the scene for fragile supply chains exposed to the multiple shocks of an unlikely — but not unprecedented — global emergency.

   Dive deeper:
   — Interestingly, this lean, “just-in time” philosophy of production and inventory was popularized in the 1980s. In times of crisis like COVID-19, lean philosophy can cause serious issues.
   — In this long-read, the Atlantic describes how our modern supply chain is snapping due to the systemic fragilities caused by an economy built on outsourcing, lack of diversification and just-in-time inventory.
   — If you prefer video, here is a Coronavirus Briefing from Yossi Sheffi, Director of the MIT Center for Transportation and Logistics, in which he elaborates on the systematic risks of our global supply chains and how coronavirus has exposed them.
   — Harvard Business Review is calling the pandemic a wake-up call for supply-chain management, with companies finding themselves unprepared for a crisis despite ‘numerous supply-chain upheavals inflicted by disasters in the last decade’.

2.  Supply Seizures

   In the early months of 2020, the emergence of COVID-19 placed China in a state of quarantined emergency. Suddenly, in an implosive, dramatic fashion, the world’s factory-floor stopped producing. As the once-epic outflow of Chinese goods started to dry up, the rest of the world had to grapple with the consequences of over-relying on a limited number of countries’ manufacturing capabilities — most evident in the shortage of critical health supplies like masks, protective equipment and ventilators.

   Dive deeper:
   — According to the WEF, Chinese industrial production fell 13.5% in the first months of 2020 (compared to 2019), causing ripple effects all throughout the world economy.
   — The world’s largest 1,000 companies have concentrated 12,000 of their most important facilities — factories, warehouses, and other operations — across areas that were quarantined in China, South Korea and Northern Italy.
   — According to South China Morning Post, despite Chinese ports reopening in early-April 2020, air cargo was severely limited and prices reached unprecedented highs — and consequently, trucks had to step in to pick up some of the slack.

3.  Demand Disruptions

   As the virus spread across the world and officially became a global emergency, countries moved into progressive states of lockdown and national isolation. Almost overnight, the shape and scale of global demand for goods were drastically altered. People stopped purchasing certain goods and panic-bought others, causing supermarkets and grocery-delivery services to thrive, even as closures in hospitality, transport, retail and entertainment paralyzed the industrial flow of bulk goods. Countries now find themselves in various stages of reopening, but whether that translates into a recovery of consumer demand rests on a delicate negotiation between public-health outcomes and economic revival.

   Dive deeper:
   — Despite a relatively healthy food supply, many food supply chains around the world were in chaotic disorder as they struggled to adapt to polarized demand between panic-hoarding households and shuttered restaurants, schools, airports and event spaces.
   — The Bangladeshi garment industry was in crisis-mode after worldwide retailers cancelled more than £3 billion worth of orders. This may prove emblematic of the kinds of cost-shifting that could take place as demand in the developed world falters and production centers in the Global South are forced to bear the cost.
   — McKinsey forecast that some 40–50% of discretionary spending in the early COVID-19 months might not occur, before picking up in late-2020 and 2021.
   — When it comes to overland freight, whether truckers’ services are in demand or they’re completely out of work depends almost entirely on the industries they serve. Some trucking firms reported tough times, while others claimed that it’s ‘like Christmas’.

4. Second-Order Mutations

   Supply chains are often likened to the conducting of an orchestra; an assembly of interconnected players, all dependent on a shared rhythm, each only as strong as their weakest link. At the beginning of this long emergency, the quarantine in China represented a continental-scale weak link. Now, with their factories mostly reopened, global demand for the very goods those factories produce remains uncertain, representing a broader array of overlapping and enduring weak links. These shocks continue to initiate and exacerbate certain second-order mutations throughout the system — some expected, others less-so — from an unprecedented surge in e-commerce to the utter chaos in the global oil industry.

   Dive deeper:
   — We’re likely to see a widespread, lingering shift from physical retail to e-commerce, with the biggest gains concentrating in e-commerce behemoths like Amazon and Instacart — on the other hand, this has led to an increasing amount of precarious, dangerous gig-work.
   — With the reduced global flow of goods and totally extinguished movements of people, oil markets went into cardiac arrest, and the long-term implications for supply chains are still in the realm of speculation.
   — Similar to retail, the experience economy has seen a necessary shift from physical to digital under the locked down reality — what would that mean for the movement of goods if sport, entertainment and events remained in the virtual space, deep into the future?
   — As one supply chain management executive explains on the Exponential View podcast, labor conditions — and entire labor markets — in developing countries often rely on the ‘goodwill’ of upstream buyers in developed countries. We may see a degradation of workers’ rights as companies relocate, renegotiate contracts or exit existing contracts.

5. Post-Viral Projections

   Many parts of life still remain more uncertain than ever — and what are supply chains, if not a logistical representation of the flows and connections of everyday life? How parts of the world stay in this state of suspended animation is unclear, we can already start learning from experience to explore how advanced technologies, new geopolitical relations and an increased focus on resilience and robustness may help reshape the supply chains of tomorrow.

   Dive deeper:
   —Nick Vyas, executive director of the Center for Global Supply Chain Management at USC, predicts that we’ll likely start to see an increasing dependence on manufacturing centers in South America.
   —Likewise, this New York Times piece predicts a shift in supply chain strategy from efficiency to resilience, with experts suggesting there will be “a rethink of how much any country wants to be reliant on any other country.”
   —VC inventors Santosh Sankar and Matt McHugh explore the systems concept of antifragility, some historic examples of antifragility in supply chains and how they believe predictive analytics, robotics and last-mile drone delivery could make our supply chains more robust and antifragile.
   —However, we need to be wary of the potential side-effects this reshoring and digitalization of supply chains may have on worker’s rights. There will be high likelihood that some firms will opt to transfer the costs of more resilient supply chains — which will not be insignificant — onto workers through labor mechanisms like automation, surveillance and precarious gig-work. Watch Saiph Savage discuss how automation can be deployed to increase solidarity and empowerment for workers.

Conclusion: Key Questions for a Better Future of Logistics

What can we take away from this dramatic affair as we gradually emerge — rattled but more determined than ever — and continue to chart a course towards a better and more empowering future of mobility? Although their answers will remain up for discussion for some time, we believe there are some crucial questions we should begin to grapple with to fulfil that beautiful ambition:
1. How can we adapt to service new markets emerging from our shifting landscapes of consumer demand?
2. How can we be leaders in upholding workers’ rights amidst industries tending towards automation and precarity?
3. How can we balance near-term efficiency with long-term resilience to develop a more robust, crisis-equipped alternative to the fragile lean philosophy?