“The risks of a recession have risen because of the escalating trade war and oil shock. Nevertheless, given the momentum of growth and expected additional stimulus, a recession can probably be avoided.” (quoting the Global Economic Forecast Flash, September 2019.)
When the economy of any country goes through a sudden decline, it is considered to be a financial crisis. It can occur when high-interest rates, limited loaning and dropping in consumer spending happen, and is the cause of companies sacking employees to survive the economic recession.
What are the current reasons for an economic crisis:
- The intensification of the trade conflict between the USA and China.
- The attack on Saudi Arabia oil production facilities leading to an oil price spike.
- The global trade wars.
- The rise of household and government debt levels.
- Trade imbalances.
- The structural problem of the Eurozone system.
- The Monetary policy inflexibility.
- New governments are changing the political economy.
- Manufacturers crisis are coping with disrupted manufacturing operations.
- The supply constraints at the global automotive industry.
- Strikes, boycotts resulting in serious production issues and delays in order deliveries.
How is the Supply Chain affected?
- A likely falling of Gross Domestic Product (GDP).
- The economical supply disruptions.
- A drying up of liquidity.
- Rocketing/dropping prices due to inflation/deflation.
- New taxes and tariffs on most goods imports
- The boost of consumer prices.
- Consumers spending is diminishing.
- High unemployment levels can be one of the causes of it.
- The need to reduce the workforce or their work-hours.
- Shortage of essential elements for production.
- Deficiency in transportation to move your products.
- Inefficient Import/Export trade.
- Weakness in business fixed investment.
How can you be prepared for a SC economic crisis?
- Educate yourself on simple economics to recognise initial alert.
- Start creating an emergency cash fund.
- Be more economical with your monthly bills.
- Create another form of earnings.
- Do not get into debts.
Could your Supply Chain withstand a disruption?
Look at a disaster from multiple angles: operationally, financially, logistically, reputationally, economically, and much more. Identify where things could go wrong (economic crisis, labour strike, fires, a natural disaster.). The focus should be on possible risks and how to handle them.
You can anticipate sudden and shocking factors through a well-designed Supply Chain Management SCM in place to coordinate and integrate your company after a crisis like the economic crisis we mention before. It demand you to be prepared for an effective response at all times to handle whatever arises from these spontaneous disturbances to protect our SCs from any catastrophic damage. Leaders needed to remain assertive and decisive throughout the crisis management process, and should shape a crisis mitigation plan.
Final comments: reaction to a global economic Supply Chain crisis requires specific administrative tools. If enterprises accept crisis events as an opportunity to be resilient and put into operation new efficient plans, they could come forward from such a crisis with a total with a refreshed and stronger brand vision. Don’t be taken by surprise!
Dave Food
Prophetic Technology
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