Corporates Must Review Supply Chains to Withstand Prolonged Disruptions – Citi
(14 December 2021 – United Kingdom) Corporates will need to review their supply chains based on lessons learned from the pandemic with supply chain pressures at a point where they have stopped getting worse yet there is currently no sign of any substantial improvements according to Citi’s economists.
The global inventory system was not designed to absorb the highly uneven stops and starts in demand and production that the pandemic has caused, and the ongoing global vaccination campaign is a critical contributor to an eventual easing of supply-chain pressures. A number of macroeconomic factors have came into play during the pandemic to disrupt supply chains including supply-chain management practices, shifts in consumption towards goods, monetary and fiscal stimulus by the public sector spurring aggregate demand, the emergence of the Delta variant, more recent Omicron variant impacts and commodity shocks that have amplified other supply-side pressures. Citi acknowledges the speed at which these disruptions have unfolded globally.
“The pandemic brought a sustained substitution in consumer spending towards goods. Coupled with the sizable macroeconomic stimulus, this has driven the demand for goods well above supply in many sectors. The recovery from the pandemic, as well as the actions taken to support the economy, have created a situation where the demand for goods has run well ahead of their supply. The resulting supply-side disruptions are, at least in part, the result of firms desperately trying to catch up” stated Citi’s Global Chief Economist, Nathan Sheets.
“The supply chain disruptions globally are the by-product of multiple events including national lockdowns, port congestion, and labour and energy shortages, layered on top of rising geopolitical tensions. As different parts of the world reopen their borders, lift restrictions, and resume manufacturing operations, we see an imbalance of supply and demand in the market. Suppliers and sellers are struggling to keep up with the demand from reopened economies” commented Global Head of Citi’s Treasury and Trade Solutions (TTS), Shahmir Khaliq.
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