Reshoring in Global Supply Chains

The latest Eurozone activity surveys showed a decline in the Purchasing Managers' Index (PMI), dropping to a low of 29.7 in March, representing the largest decline since the survey began in July 1998. The 50-point level separates growth from contraction, meaning below 50 points indicates recession and losses, and above 50 points indicates growth and prosperity.

The latest Eurozone activity surveys showed a decline in the Purchasing Managers' Index (PMI), dropping to a low of 29.7 in March, representing the largest decline since the survey began in July 1998. The 50-point level separates growth from contraction, meaning below 50 points indicates recession and losses, and above 50 points indicates growth and prosperity.

This means significant setbacks will follow supply chains. The term "Supply Chain" is contemporary, and its importance has recently increased. It is a network of traders, distributors, carriers, storage facilities, and suppliers involved in producing, assembling, delivering, and selling a product. Supply chain management typically consists of several companies coordinating among themselves and overseeing three flows: the product flow, which includes transporting goods from the supplier to the consumer; the information flow, which includes demand information and delivery status; and the financial flow, which includes payment schedules, credit terms, and additional arrangements.

The current situation with the spread of the Coronavirus and the resulting calamities that prompted countries to declare emergencies have caused sharp fluctuations in global supply chains. Many industrial and commercial sectors have halted, in addition to the significant shock in demand rates. According to recent reports, most global factories are suffering from their worst performance levels in history after the Coronavirus forced many of them to close with supply chains disrupted.

According to Bloomberg, data from Asia, Europe, and the United States indicate that manufacturing in some countries has fallen to its lowest level since the past global financial crisis. This has prompted the G20 trade and investment ministers to pledge immediate measures to facilitate trade, encourage the production of equipment and medicines, and reduce disruptions to supply chains.

Reports issued by the Institute for Supply Management also show that factory orders in the United States have fallen to their lowest level in 11 years, while manufacturing in major Eurozone economies such as Germany, France, and Italy has contracted. The average of new orders reached its lowest level in 11 years, in addition to Britain recording a significant decline in production and job rates.

In America, the first domino fell with the bankruptcy of the shale oil icon, Whiting Petroleum. American unemployment claims have risen enormously to a level never seen since the beginning of US data measurement, after being less than 300,000 two weeks ago, rising last week to 3.2 million claims, and reaching 6.6 million claims this week.

If the tragic situation continues, food supply chains will undoubtedly suffer. The United Nations Food and Agriculture Organization (FAO) says it expects disruptions in food supplies in April and May. Therefore, local production in America and other countries is not the only problem, but rather supply problems related to food. For example, the United States relies on foreign supplies for about 20% of its food, including 80% of its seafood, half of which comes from Asia, according to Mesh Intelligence calculations.

In conclusion, the Coronavirus will push countries and companies to search for new production, manufacturing, assembly, and distribution centers. Old manufacturing centers in China and Asia will suffer greatly due to the closures of industrial complexes and many cities to limit the spread of the Coronavirus, meaning that new countries will position themselves to find a foothold in global trade. Perhaps there will be a return of emigrant companies to their home countries in America and Europe, especially pharmaceutical and medical companies.