Question

Reflect on the role of China in global operations management:

1. Before the covid-19 crisis
2. After the covid-19 crisis

Answer in terms of supply chain management. I

Answer 1

Ans

Before the Covid-19 crisis China had become the manufacturing hub for major industries like electronics, auto components, pharmaceuticals etc. The lower labour costs coupled with great infrastructure made China a manufacturing powerhouse. Almost sixty percent of world's active pharmaceutical ingredients (API's) are manufactured in China. China is also a major consumer market and therefore electronic and mobile companies set up factories there as the market was available there as well.

However the Covid-19 pandemic has exposed the underlying risk of having manufacturing base or critical component base in one country e.g. China. Due to the pandemic situation in China there was complete lockdown in many parts of China which has led to supply disruptions from China. Even after the easing of lockdown the supply channels across the world e.g.. ports and airports are still to restart and so in spite of demand the company is not able to supply the product to all the nations due to supply channel disruptions . Due to the ongoing trade war between US and China the import of Chinese and products into US is likely to get affected. Following steps need to be taken by global companies to make their supply chains resilient in post Covid times:

1. Based on the principle of making supply chains resilient and agile companies should focus on developing alternative production centers besides the existing ones in Asia so as to mitigate the risk of shortages due to either Covid or trade barriers. These production centers should be based on the demand patterns across the globe so that the demand of key markets can be served even if any of these production centers gets affected for any reason mentioned above.

2. Alternative sourcing of parts and products from different geographies keeping the demand from key markets in place so that supply disruption in one location allows sourcing from alternative source .

3. Ability to source locally all the major Components in the event of adverse international trade situation like duties to continue to serve the markets

4. The supply relationships should be such that the order sizes can be flexible to increase or decrease based on the external environment. The pricing should be long term so that the period of turmoil does not lead to unreasonable escalation of  prices.