Shanghai Lockdown Could Be the Start of More Supply Chain Challenges
After two years of relatively successful pandemic policies in China, a record number of new COVID-19 cases has led to a major lockdown in the city of Shanghai, leading to compounding supply chain problems that could have a global impact.
With cases continuing to climb, disruptions and rising costs are extending out to the transportation industry. Trucking has slowed to a crawl, as drivers entering ports and factories must show negative COVID-19 test results from as recently as a day earlier. This has already led to a 30% drop in efficiency, causing many companies to divert cargo away from Shanghai.
The ideal timeframe to bounce back – if officials can contain the outbreak and lift lockdowns – is the end of April. But even in this best-case scenario, the logistical backlog could take nearly a quarter of the year to address, and in the meantime commodity prices will rise and suppliers by another 4-5%.
But neighboring Kunshan is an example of what could happen if this current lockdown is just beginning – as a major automotive and electronics supplier, the city has also faced tight restrictions that prompted many factories to stop production.
Ultimately, organizations will have to develop supply chain strategies that incorporate ongoing disruptions and uncertainty.