- Since late August, Shenzhen has been on lockdown and just recently began to ease up on the mandatory orders.
- “Shenzhen is a major manufacturing and logistics hub, covering many different industries, and the parts they make are widely used around the world. Every country has factories that rely on parts coming out of Shenzhen.”
- While the Shenzhen lockdowns are not the only aspect fueling the looming recession, it is definitely making things worse.
Due to an increasing number of COVID-19 cases in the world’s technology hub, Shenzhen, China ordered most of its 17.7 million residents to remain largely at home over an extended period of time and to take two rounds of tests. Bus and subway services in districts conducting tests were suspended, and major factories and suppliers were closed down.
Since late August, Shenzhen has been on lockdown and just recently began to ease up on the mandatory orders. Infections in its latest outbreak showed signs of stabilizing, while most of the 21.2 million residents of Chengdu city faced extended curbs on their movements. China has stuck to its stringent COVID policies, even as most other countries have eased restrictions with the aim of living with the virus, according to Reuters, and supply chain experts are worried about the impact of the days-long closure on both sites and suppliers.
Severe Supply Chain Disruptions
According to exclusive data from the leading supply chain monitoring and mapping solution, Resilinc, this latest lockdown has “severe” supply chain disruption potential. Resilinc’s data reveals:
- A total of 2618 (factory) sites affected
- The production of over 14,500 different parts impacted
- The average recovery time is 6 weeks (the worst being 336 weeks)
- Nearly $11B in revenue is at risk (across the companies Resilinc monitors)
“China takes their COVID policy very seriously, so when they saw a rise in cases, they were very strict about mandatory lockdowns and restricting movements to help prevent the spread,” Bindiya Vakil, CEO of Resilinc, said. “Shenzhen is a major manufacturing and logistics hub, covering many different industries, and the parts they make are widely used around the world. Every country has factories that rely on parts coming out of Shenzhen.”
Advancing the Recession
While the Shenzhen lockdowns are not the only aspect fueling the looming recession, it is definitely making things worse. With inflation skyrocketing prices across the board, companies are already bleeding through their profits just to pay for raw materials as well as trying to expedite delayed shipments or choosing air instead of ground, which is more expensive. The Shenzhen delays are only escalating the financial distress that many businesses are experiencing.
How to Get Around the Supply Chain Delays
According to Vakil, the biggest problem companies are facing right now is the fact that they are not mapping their supply chains properly, which means they are continuously scrambling whenever there are any sort of delays on shipments. If you do not know where your parts are coming from, it makes it more difficult to stay ahead.
“When the war in Ukraine began, many suppliers were finding out that some of their parts were made in that country, which were then all delayed. You need to work with other companies and map out your supply chain. This is the foundation on which we can not only survive on, but thrive on, despite all of the interruptions we are dealing with at this time. Now, it is a lockdown, next month, it can be a hurricane, and then a drought — disruptions are going to continuously happen, but building a database around your parts can help keep you from being caught off guard and scrambling at the last minute,” Vakil said.
There is no predicting when the Shenzhen lockdowns will be completely lifted, but just as Vakil said, there will always be disruptions that will get in the way of you doing business. It is important to map out your supply chain and be fully prepared in order to prevent your company from being too negatively impacted.