Modern-day supply chain shocks and their impacts

28 August 2020

Tracing some of the biggest supply chain disruptors of the past 20 years and the changes they prompted.

 

2001
Foot & mouth disease 
2,000 cases of foot and mouth disease at UK farms forced the culling of over 6m cows and sheep, costing £8bn. UK and European meat and dairy export markets were damaged, as countries temporarily banned UK imports and subsequently halted domestic and cross-border animal transportation and live cattle markets in order to contain the spread.
Eight months
It reformed rules on livestock feed and animal tracing, and increased global disease outbreak monitoring.

 

2002-2003
SARS
Severe acute respiratory syndrome affected 8,000 people and killed 800. Originating in China, SARS spread to 26 countries, affecting global trade, retail, transport and tourism. Industrial output dropped by 6.3% and manufacturing and high-tech production supply chains suffered huge disruptions.
Eight months
Many companies increased inventories to cope with shortages, China reconsidered its secrecy laws and communication with world media and the WHO, and made contingency plans that helped reduce the impact of Covid-19. 

 

2003-2005
Bird flu 
After initial cases of H5N1 avian influenza in 1997, between 2003 and 2005 it advanced to Europe, the US, Russia, Egypt and Nigeria. Worldwide, 150m birds died or were culled and over 250 humans were infected. Global poultry trade suffered with predicted costs between 0.3%-1.8% of GDP.
Global outbreak lasted two years
Prompted improvements in regulatory standards and product testing. 

 

2008-2010
Global financial crisis
The collapse of the US banking system following excessive risk-taking in lending triggered the biggest economic downturn since the Great Depression. It also spiked interest rates, devalued assets and unemployment hit exports and supply chains hard.
  Two years
Consequences included economic and business uncertainty, financing difficulties, logistical problems and cost effects, resulting in a greater focus on risk management.

 

2010
Icelandic volcano 
When the Eyjafjallajökull volcano unexpectedly erupted in April 2010, an ash cloud dispersed over Europe and the North Atlantic, disrupting a third of global air traffic, both passenger and freight, and causing a net aviation sector loss of $2.2bn.
One week
The International Volcanic Ash Task Force was formed to manage aviation risk, which reduced the impact of a further eruption in 2011.

 

2011
The great East Japan earthquake
The Tohoku earthquake caused initial damage but the subsequent tsunami hit the Fukushima Daiishi nuclear power station, necessitating shutdown and causing severe devastation. Taking more than 20,000 lives, it also proved costly in economic terms as the impact on exports of critical components, agriculture, transport, and tourism (much due to energy loss and logistics issues) slowed the country's recovery.
One day
Japan invested in new energy, infrastructure and disaster planning, including of supply routes. 

 

2014
Ebola 
There were around 30,000 cases and 13,000 deaths in West Africa, and the World Bank estimated a $2.2bn GDP loss from Liberia, Guinea and Sierra Leone, with a significant impact on agriculture and foreign investment.   
Two years
The WHO supported the development and use of untested vaccines to reduce drug development times, and mass quarantines were undertaken to limit the spread of the disease.

 

2015
Brexit
Predictions suggested that when the UK left the EU to join EU free trade, while its trade with EU countries would fall by about a quarter, greater opportunities could open in global markets and supply chains. The actual effects are yet to be known as the situation evolves. 
Five years
Uncertainty has reduced productivity and investments in UK manufacturing, but fuelled trade talks with major economies, such as the US. 

 

2018
US-China trade war 
When Trump implemented 25% tariffs on $50bn of Chinese imports, China imposed retaliatory tariffs. US goods exports decreased by $1.8bn in a month, with soybean alone falling by over $1bn, while automotive vehicles, parts, and engine exports declined by about $1bn. The struggle is ongoing.
Two years and nine months
US firms sought alternative sources, while China redesigned products to avoid sanctions and tried to redirect existing goods to other countries.

 

2020
Covid-19 pandemic
Lockdowns, quarantines, factory closures and long-term social distancing measures have had significant negative impacts on global productivity. While emerging from the crisis is different for all countries, expert suggest that apart from China, global economies will have a slow recovery from the decline. 
Ongoing
Most firms have had to find new suppliers and invest in demand planning, but the full impact and responses remain to be seen.

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