Covid-19 continues to impact world’s supply chain

China’s lockdowns and harsh pandemic-related restrictions, along with protests there, are causing ripples around the world

When I was a kid, a popular song every December was a tune called “All I Want for Christmas Is My Two Front Teeth.”

Fast forward to today, and the No. 1 song on my hit parade is a tune I would call “All I Want for Next Year Is a Sound Supply Chain.”

But, thanks to the tenacity of the pandemic, there’s a good chance my stocking is going to be empty this holiday season.

Last week, the lockdowns and harsh pandemic-related restrictions imposed throughout China resulted in massive protests there and are likely to continue to rattle a supply chain still months away from operating seamlessly.

For the record, I realize that a significant amount of furniture manufacturing has left China for Vietnam and other countries, but like it or not, China’s clout in manufacturing still makes it the straw that stirs the drink.

According to the most recent data available by the United Nations Statistics Division, China — representing 28.7% of all Global Manufacturing Output — heads the list of global producers.

So, to me, the reality of millions of angry Chinese workers protesting against their country’s zero-Covid policies — in conjunction with those policies themselves — means more trouble for the global supply chain.

Most observers agree that China’s Covid policies are admittedly the most severe of any country. While administered locally and regionally, they all follow the same guidelines that routinely include lockdowns of major cities, even if only a handful of Covid-19 cases are found; the use of tracing apps that monitor the movements of individuals; mandatory mass testing; factory workers
forced to live at the factories; and more.

The sobering news is that, despite China’s stringent Covid policies, the country is grappling with an all-time-high number of new cases of the virus.

Last week, the National Health Commission reported 31,444 cases in a single day, a number that soundly surpassed a previous single-day record of 29,317 that had been reported this past April.

China’s ongoing struggle with the pandemic has upset the apple carts of a host of giant companies, including Apple. Recently, because of the lockdown of Apple’s Foxconn assembly plant in Zhengzhou, production of the company’s iPhone models temporarily came to a halt and will result in delayed shipments.

Conversations with several sources still bringing in upholstery from China told me privately that the spikes in new cases of Covid, coupled with the country’s tough Covid policies, are making it increasingly hard to navigate what one supplier called “the sea of uncertainty we are trying to sail in.”

While no one, including me, has a crystal ball, it is crystal clear that China’s struggle with Covid-19 has resulted in spiking levels of uncertainty and volatility not only in China but worldwide.

Covid-related disruptions at the world’s largest manufacturer have elevated already tricky issues, including forecasting, production and shipping, while allowing other suppliers, such as Vietnam, to get a leg up, especially in furniture.

Here, Vietnam, because of China’s pandemic-related problems, has been able to bump its global exports of furniture from about 11% in 2019 to 22% this year. According to BusinessWire, a Berkshire-Hathaway company, in 2021, Vietnam’s exports of wood products and furniture were approximately US$14.5 billion, up 17.2% from 2020. In 2021, Vietnam exported wood products and furniture to a total of 40 countries and regions.

Looking ahead, much will rest on two key questions — how long will Covid hang around and how long will the Chinese government enforce zero-Covid policies?

At this point, your guess is as good, if not better, than mine. The only thing I am certain of is that when the world’s biggest engine misfires, we will all feel it.

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