Covid 19 Effect On Global Cupply Chain-Team A1

Covid 19 effect on global supply chain-Challenges for
Financial Risk and the Global Economy
Lecturer Name : Dina Chhorn

Subject : Market Economy & International Finanace
Group Members: 1. Ang Dyanak 4. Bun Theavuthnicola
2. Bong Det 5. Chhan Chetana
3. Bou Bunthy
Academic Year 2023-2024

Table of Contents
1) Research question and Objectives of
the study
2) Overview of Covid 19
3) Impact of Covid-19 on global supply
chains
4) Conclusion and Recommendation
5) References
1. Research question and Objectives of the study
Research Question:
How has the COVID-19 pandemic impacted the global supply chain in terms of financial risk, and what are the
implications for the global economy?
Objectives of the study:

1. Determine the extent of COVID-19 disruptions on the global supply chain entails comprehensively analyzing the
impact of the pandemic on various aspects of supply chain operations worldwide, including production,
transportation, logistics, and procurement processes, to understand the scale and scope of disruptions and their
implications for supply chain resilience.
2. Identifying financial risks and challenges faced by businesses involves examining the financial implications of
COVID-19-related disruptions, such as increased operating costs, inventory management challenge and cash flow
constraints, to develop strategies that mitigate their impact and support the financial health and stability of
companies throughout the supply chain.
3. Assessing the implications for the global economy by examining the economic slowdown, inflationary pressures,
disruptions to global trade, and commerce is to gain a comprehensive understanding of how the COVID-19
pandemic has impacted various aspects of the global economy.
2. Overview of Covid 19
The Covid-19 pandemic has caused major disruptions to
global supply chains, hampering trade in goods between
countries. During the first phase of the pandemic,
factory shutdowns and mobility restrictions disrupted
the logistics of manufacturing firms. As countries
opened up and the increased demand for goods began
to outstrip supply, port congestions raised shipping
costs, putting additional pressure on global supply
chains.
However, the COVID-19 pandemic prompted a
coordinated global response, with collaboration
between governments, international organizations,
scientists, healthcare workers, and the private sector to
develop vaccines, share information, and provide
support to affected communities.
Overall, the COVID-19 pandemic represents a significant
global challenge with far-reaching consequences for
public health, economies, and societies. Understanding
the origins, spread, and ongoing challenges of the
pandemic is essential for developing effective strategies
to mitigate its impact and prevent future outbreaks.
1. Graph according to Julian Geoffrey López July 13, 2020, from https://www.irex.org/insight/what-covid-19-graphs-are-and-arent-telling-us
3. Impact of COVID-19 on global supply chains: disruptions in
production, distribution, and shortages
The figure shows that while retailers had 43

days of inventory in February 2020, today
they have just 33 days.
https://intracen.org/news-and-events/news/blog-the-great-shutdown-how-covid-19-
disrupts-supply-chains
3. Impact of COVID-19 on global supply chains: disruptions in production,
distribution, and shortages (con’t)
MAJOR GSC DISRUPTIONS

• Disrupted Commodities and Supply Chain
• Disrupted International Logistics
• Distorted Demand
Due to the lockdown in many cities, the constrained
availability of human resources, raw materials, and
consumables resulted in shutdown or capability
suspension in almost all sectors. However, on the
customer side, demands relevant to the prevention of
COVID-19 were rising. Demand for items like masks
was high, whereas demand for electronics was falling.
The international logistics for maritime, air, and
terrestrial routes experienced delays, postponements,
cancellations, and obstructions due to large-scale
travel restrictions and the closing of borders.
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8768947/
3. Impact of COVID-19 on global supply chains: Financial Impact of Supply
Chain Disruptions
Increase Costs:
• Production Delays: Lockdowns and labor shortages caused production delays, forcing companies to hold onto raw materials
and finished goods for longer periods. This ties up capital and increases storage costs.
• Shipping Disruption: Congestion at ports, limited container availability, and rising fuel prices led to a surge in shipping costs.
These additional costs eat into profit margins and strain budgets.
• Commodity Price Fluctuation: Pandemic-induced disruptions and changing consumer behavior caused fluctuations in
commodity prices. This volatility makes it difficult for businesses to accurately forecast costs and manage expenses.
Inventory Management Challenges:

• Stock Shortages: Disruptions in production and transportation led to stock shortages of essential goods and raw materials.
Businesses struggled to meet customer demand, potentially losing sales and revenue.
• Excess Inventory: In some cases, businesses misjudged demand shifts, leading to excess inventory of specific goods. Holding
onto excess inventory creates storage costs and reduces available cash flow.
• Demand forecasting difficulties: The pandemic's unpredictability made it challenging for businesses to accurately forecast
demand. This creates difficulties in optimizing inventory levels and increases the risk of stockouts or overstocking.
Sources:
https://www.ey.com/en_gl/insights/supply-chain/how-covid-19-impacted-supply-chains-and-what-comes-next
https://www.wsj.com/business/logistics/ship-freight-rates-tumble-as-u-s-consumers-buy-fewer-goods-ff7fc08
"Empty Shelves and Long Waits: The Supply Chain Stumbles" (https://www.nytimes.com/interactive/2021/12/05/business/economy/supply-chain.html)
“The impact of COVID-19 on supply chains: a systematic review and future research directions” https://link.springer.com/article/10.1007/s12351-023-00790-w
3. Impact of COVID-19 on global supply chains: Financial Impact of Supply
Chain Disruptions (con’t)
Cash Flow Constraints:
• Delays Payments: Supply chain disruptions caused delays in receiving finished goods and
invoices. This delay in receiving payments from customers creates cash flow problems for
businesses.
• Increased working capital needs: The need to hold onto larger inventories and manage
fluctuating costs requires more working capital. This can strain businesses with limited
cash reserves.
• Debt Burden: Businesses may need to take on additional debt to manage cash flow
constraints caused by supply chain disruptions. This increases their debt burden and
financial risk.
Sources: "How COVID-19 impacted supply chains and what comes next" (https://www.ey.com/en_gl/insights/supply-
chain/how-covid-19-impacted-supply-chains-and-what-comes-next
)
3. Impact of COVID-19 on global supply chains: Implications for the
global economy
Economic Slowdown
• The pandemic led to widespread lockdowns,
causing a sharp decline in economic activity.
• Businesses faced closures, supply chains were
disrupted, and unemployment rates soared.
f
• GDP growth rates plummeted globally, with
many countries experiencing recessions.
3. Impact of COVID-19 on global supply chains: Implications
for the global economy (con’t)
Inflation Pressure & Disruptions to Global Trade and Commerce
Production cost increased Rising costs of goods and Shift in consumer behavior to
and longer delivery time due services impacted consumers only purchase certain
to shortage of goods. and businesses. products.
Global supply chain pressures and shipping costs

Citation: IMF Working Papers 2023, 039; 10.5089/9798400235436.001.A001
Sources: Haver Analytics, and IMF staff calculations. Note: The chart on panel A illustrates the evolution of the
Global Supply Chain Pressure Index (GSCPI). In panel B, the blue and yellow lines represent the Baltic Dry Index
Travel restrictions and border Supply chains were severely Businesses faced challenges and the Harpex Index, respectively.
closures disrupted global impacted, leading to in sourcing raw materials and
trade flows. shortages of essential goods. accessing markets.
4. Conclusion
In conclusion, the COVID-19 pandemic had a profound impact on global supply chains, disrupting the flow of
goods and services across industries and regions. The resulting supply chain disruptions contributed to
significant challenges for businesses, consumers, and policymakers alike. Key conclusions about the impact of
COVID-19 on supply chains include:
• Increase Costs
• Inventory Management Challenges
• Cash Flow Constraints
• Economic Slowdown and
• Inflation Pressure
As businesses and economies continue to adapt to the evolving challenges and opportunities, the lessons
learned from the pandemic will inform future strategies for supply chain management and global trade.
4. Recommendations for Supply Chain Optimization
Diversify Suppliers Digitalize Operations Foster Collaboration Prioritize Sustainability

Expand the supplier Leverage digital Strengthen partnerships Adopt sustainable
base to reduce technologies to with suppliers, practices and circular
reliance on a single enhance visibility, customers, and logistics economy principles to
source and improve flexibility, and providers to improve enhance long-term
supply chain responsiveness across coordination and supply chain resilience.
resilience. the supply chain. resilience.
References:
https://www.statista.com/chart/22223/oecd-labor-force-unemployment/
https://www.euractiv.com/section/economy-jobs/news/covid-19-shook-rattled-and-rolled-
the-global-economy-in-2020/
https://research.stlouisfed.org/publications/review/2022/02/07/global-supply-chain-
disruptions-and-inflation-during-the-covid-19-pandemic/
https://www.ey.com/en_gl/insights/supply-chain/how-covid-19-impacted-supply-chains-
and-what-comes-next
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8768947/

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Covid 19 effect on global supply chain-Challenges for

Financial Risk and the Global Economy

Lecturer Name : Dina Chhorn

Academic Year 2023-2024

Objectives of the study:

The figure shows that while retailers had 43

MAJOR GSC DISRUPTIONS

Inventory Management Challenges:

Global supply chain pressures and shipping costs

Diversify Suppliers Digitalize Operations Foster Collaboration Prioritize Sustainability

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