Smart technology is revolutionizing global manufacturing, compelling industries to reconsider their dependence on China as the world’s factory. The COVID-19 pandemic has accelerated this shift, revealing the risks of relying too heavily on a single country for supply chains. According to a survey from the Institute for Supply Management (ISM), 75% of U.S. companies faced supply chain disruptions, with nearly half projecting revenue drops exceeding 20%. This global health crisis might be the turning point that forces entire industries to adopt more resilient, tech-driven strategies.
Smart Technology and Supply Chain Resilience
The vulnerabilities in global supply chains first surfaced after Japan's 2011 earthquake and tsunami. The traditional just-in-time manufacturing model, which minimized inventory levels, failed when auto suppliers couldn’t access essential electronic components. The disaster forced companies to halt vehicle production in certain colors. Similarly, Thailand’s floods disrupted the computer industry, causing prolonged hard-drive shortages.
These events highlighted the risks of inflexible supply chains. Since then, smart technology has become crucial in creating more adaptive supply chains. The U.S.-China trade war, ongoing since 2018, pushed many businesses to diversify their manufacturing processes, avoiding tariffs and maintaining profitability. However, the pandemic's global reach has exposed weaknesses in nearly every region, from East to West.
Adapting with Smart Technology in Manufacturing
Early in the COVID-19 outbreak, companies with the foresight to stockpile inventory ahead of the Lunar New Year gained a crucial advantage. They had time to strategize while others faced a sudden halt in operations. Larger firms expected to weather the storm, assuming the disruptions were temporary. However, smaller companies with lean inventories and limited cash flow had to be more agile.
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Lead times for raw materials and components doubled worldwide in early 2020. Almost 60% of ISM respondents reported longer lead times for China-sourced components. Additionally, the ISM Purchasing Managers Index showed a 37.8% increase in backlog orders for the computer and electronics industry as of April 2020. As factories resume operations, companies may find their suppliers working at reduced capacity, struggling with backorders.
Despite China allowing normal work activities to resume by mid-March, over 429,000 businesses dissolved or suspended operations for the rest of the year. Any company losing a key supply chain node will face further revenue delays and higher costs as they transition to alternative production lines.
The Role of Smart Technology in Responding to Global Crises
The pandemic has underscored the weaknesses of globalized supply chains. Nations like Japan, the U.S., and India are now offering incentives to companies that relocate production outside of China. Although shifting manufacturing is complex, smart technology offers solutions by standardizing parts and enabling rapid response to disruptions. Change management is now a priority for global supply chains, as industries brace for rolling recessions and recoveries.
Despite ongoing challenges like shipping delays and labor shortages, manufacturers continue to innovate and meet the demands of critical infrastructure. As the pandemic reshapes manufacturing hubs, the integration of smart technology, digital transformation, and cross-industry collaboration will remain essential.
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