The coronavirus pandemic could lead to a radical transformation in the way manufacturers set up their supply chains and production facilities around the world, according to a new report. The study by researchers at the University of Birmingham (Birmingham / UK; www.birmingham.ac.uk) argued that manufacturers would need to redesign and reform their global supply chains and production networks in the wake of an outbreak that has infected millions of people around the world, killed hundreds of thousands and caused the world’s economy to nosedive.

According to the report, the virus’ impact showed that global manufacturing companies should consider switching from large production sites in a single location, such as China, to numerous smaller facilities around the world, in order to reduce business risk. The researchers also said manufacturers needed to consider adjusting the balance between production in low-cost locations and activities in core markets.

The rapid speed and economic impact of Covid-19 has radically shifted the balance between governments, businesses and people, the report added. Governments, such as those in Germany and the UK, have stepped in and provided financial support to industry as well as individuals whose jobs have been hit by the virus. This has effectively initiated a programme of nationalisation, with governments becoming a key consumer and surrogate employer.

In addition, the most common operational response amongst US-headquartered firms to the China-US trade war involved relocating suppliers from China to another low-cost country. “However, the impact of Covid-19 has seen firms beginning to develop strategies dealing with supply chain disruptions, with larger firms building regional supply chains, leaning more on technology for smaller firms, and focusing on efficiency and resilience,” it said.

Report co-author John Bryson said there was a real tension between optimisation of global production networks and risks “which ripple out across the globe. The pandemic was the first time these ripples have impacted on every country and the majority of people living on this planet.” He added that Covid-19 had “highlighted the risks associated with increasing interconnectedness of people and places through economic, political, cultural, and environmental changes.” The pandemic, says the report, should be taken as an opportunity to revisit the debate on globalisation, global production networks and offshoring and to reframe this debate around risk and value.