Reference no: EM133573744

Global supply chain crisis caused by Covid-19 threatens Christmas joy around the world

As Covid-19 threatens to steal Christmas again with the emergence of the Omicron variant, those celebrating should also expect higher prices and fewer choices due to the global supply chain crisis.

According to the South China Morning Post, the global supply chain has taken massive strain since the start of the pandemic, which continues to affect the flow of goods from China and has led to rising shipment costs.

Despite the increase in retail figures, a shortage of various items such as chemicals, microchips and paint needed to manufacture and produce finished goods has increased production costs.

"Shipments were delayed by a month and prices are higher than before," said We Zhishan, a store manager at Yiwu International Trade Market.

"Containers are up to US$630 more expensive, depending on regions and countries," he said.

A report by the New York Times explained that scarcity has caused the spike in prices, which began when manufacturing companies were forced to shut down or reduce production due to strict lockdown measures.

"In response, shipping companies cut their schedules in anticipation of a drop in demand for moving goods around the world," read the report.

Meanwhile, people around the world prepared for the "new normal" by creating home offices and home gyms and purchasing items such as printers and gaming consoles, as well as paint and machinery for DIY projects.

As many factories slowly reopened and began ramping up their production, the shortage in items needed to produce these goods created a backlog as demand continued to rise.

At the same time, those products which had been finished and sent for delivery to their respective countries and regions could not be delivered due to a shortage of containers, and they piled up in warehouses across Asia.

The delivery of masks and protective gear also became a priority, occupying the space in containers that made their way to every corner of the world.

The ripple effect saw many companies placing larger orders due to shortages, resulting in one of the biggest traffic jams on record.

Source: Ryklief, S. 2021. Global supply chain crisis caused by Covid-19 threatens Christmas joy around the world.

Question 1

Suppose an organisation that manufactures personal protective equipment for the South African market is located in China. This South African organisation provides personal protective equipment as an additional product offering; however, it is not core to its operations.

Using the practical context provided and the scenario above, illustrate a supply chain depicting the movement of these goods.

Note:

You are to use the illustration of a generic supply chain provided to you as a starting point. You are not to replicate that generic supply chain as your final answer. Marks will be awarded for evidence of application to the scenario provided.

Question 2

Analyse which type of supplier relationship the South African organisation should engage with its Chinese supplier.

Note:

You are required to identify the type of supplier relationship and justify your choice with the support of theory and application to the scenario and practical case study provided.

Please note you are required to show your knowledge through application and full marks will not be awarded if only theory is provided.

Question 3

Analyse which type of negotiation the South African organisation should engage in with its Chinese supplier.

Note:

You are required to identify the type of supplier relationship and justify your choice with the support of theory and application to the scenario and practical case study provided. Please note you are required to show your knowledge through application and full marks will not be awarded if only theory is provided.