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Michael Dautner
March 18, 2020

U.S. Factories are Likely to Close Due to Coronavirus’ Supply-Chain Shock

 

 

factory

With the spread of the coronavirus in the world, especially in China, the world of commerce is going through a rough time. The factories in China have stopped operating and the ones which are in operation, aren’t operating at full potential. The United States’ markets and manufacturers being highly dependent on the Chinese raw products manufacturers, hence resulting in the supply chain issues.

From auto makers to electronics manufacturers, all the companies will have to stop the production because of lack of raw and base materials. America’s supply chain is highly dependent on China and with the recent COVID-19 outbreak, the suppliers have stopped exporting the products to America and the ones who are willing to, just simply can’t because the ports are closed and ships are either docked or aren’t stopping. The situation is evident in the business reports which shows a catastrophic fall just in March.

With parts not being delivered to America, the supply chain is disturbed and the companies are in crisis mode, and as for coronavirus, the situation is likely to get worse. IHS Markit revealed that because of the coronavirus, at least a million automobiles won’t be produced which is an extremely large number.

The America’s supply chain works on just-in-time model, i.e. There is no stockpiling, while this is good for the business on normal days. But in a situation like pandemics, in this case, the COVID-19, and natural disasters, it disrupts rather easily. This is evident when it comes to the auto manufacturers, as they can’t produce a single car without the parts from other countries.

China has geared its economy and industry in the production of base parts and raw materials. The US has geared its industry for the finished goods and is dependent on China. The American supply chain isn’t ready to give up yet. With the COVID-19 outbreak, American supply chain is in septic shock. This most likely will result in the increased prices of goods as the stocks run dry, shortage of food and other essential items. In the future, business in America needs to take steps in the direction of being less dependent on China. But for now, the situation needs to be mitigated and in order to do so, help of technologies such as ERP software can be taken. ERP software can help properly utilize the available resources in the most efficient possible way. ERP software can’t produce anything, but they can help the industry to continue the production with the maximum possible efficiency by pointing out the key areas of production.

 

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