How Covid-19 Has Profoundly Infected The Global Supply Chain

Feb. 25, 2020 11:06 AM ET4 Comments
Albert Goldson profile picture
Albert Goldson


  • The critical path elements of the global supply chain, including non-Chinese sources, are blocked leaving few alternatives especially for firms whose critical path is the only path.
  • Chinese suppliers and foreign buyers face a unique triad of challenges – operations, financial and legal - in restarting operations.
  • Black Swan II includes a mutation of Covid-19 and civil unrest events that could paralyze the global supply chain.
  • Firms in the post Covid-19 era will create more robust and diverse alternative supply chains thus Chinese manufacturers will permanently have less business even if their costs are competitive.
  • Wuhan is China’s manufacturing epicenter in which the worldis dependent for automotive parts and technology shipments.

Covid-19 is at the cusp of being classified as a pandemic as it spreads to other Asian countries notably South Korea, Japan and Vietnam that also serve as secondary and tertiary suppliers to these same companies. This means that even alternate supply chains are becoming operationally “infected” negating exit strategies. The brilliance of “just in time” shipments collapses if there’s even a slight kink in the supply chain especially if the disruption is prolonged with limited alternatives.

Triad of Challenges

China is facing a Covid-19 conundrum whose supply chains operational, financial and legal chokepoints threaten to tilt many countries into recession and possibly provoke civil unrest. For a smooth-running and efficient operation the following factors must work in harmony:

  • Operations
  • Financial
  • Legal


The following charts by Statista, a German an on-line portal for statistics, provide the global impact and outsized role of Chinese manufacturing and more specifically its manufacturing epicenter Wuhan:

Some firm’s critical path is the only path which is highly vulnerable particularly if their suppliers are sole source because of their expertise. The more specialized the product/industry, the more restrictive the supply chain options.

Even if a firm could switch to alternate supply sources quickly the supply chain has become stupefying complex pressured by hyper-competition with respect to costs. Alternate sources are not geared for a quantum leap in production or have the [skilled] manpower, and logistics to meet an increased demand that may not abate for many months. Under these extreme circumstances there are considerably higher costs at each chokepoint of the supply chain because it’s now a seller’s market. It goes without saying that these costs will be passed along to the consumer.

The two specific industries that are severely impacted by the public health crisis is automotive parts and technology shipments represented by

This article was written by

Albert Goldson profile picture
Albert Goldson is Executive Director of Indo-Brazilian Associates LLC, a NYC-based boutique think-tank and global advisory firm that provides counter-intuitive, contrarian, and often prescient, over-the-horizon geopolitical risk assessments and investment strategies. A former Public Policy Maker and US DHS officer, Mr. Goldson’s memberships in a wide-spectrum of professional organizations gives him access to influencers and decision-makers at the highest levels which include the Hedge Fund Association, Association of Former Intelligence Officers, American Society of International Lawyers and NY International Arbitration Center.

Disclosure: I am/we are long IAU. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (4)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.