Manufacturing production over the world has been greatly hit by the COVID-19 pandemic. Disruptions have been especially eminent in the Asia Pacific region, the central node of the world’s biggest network of global value chains (GVCs).
Global value chains were finding some serious challenges before the crisis strike. The disruptions caused due to climate change, natural disasters and the trade war between China and the U.S. revealed the limits of the recent model of global production that relies so much on open trade and suppliers from various geographies.
Compounded by the effects of the crisis, countries and companies are now being forced to review how production is assembled.
Global Value chain
The concept of global value chains (GVCs) integrates the new production model under globalization by which firms improve their output by locating various stages of the production process across several countries where they can gain additional value for their investment and generate a competitive benefit.
GVCs rely on a simple and cohesive supply chain to work well and maybe that is the reason people frequently utilize the terms similarly. Supply chains describe the connection of all parts that are adding to the production of a product, from the raw material to the distributor that supplies it to the destination market.
A global value chain considers the process of calculating value and that can happen in various countries and at several stages of production and includes all sectors of the economy, from agriculture to manufacturing.
How GVC is affected by the Crisis
As per Resilinc, a US-based company that keeps track of GVC and supply chains, the number of GVC disruptions strike 300 just in the April month. Because of improving the number of disruptions, manufacturing industries over the world have been looking for ways to restore and repurposing their production networks.
The Asia Pacific region has been one of the most dynamic when it comes to executing changes and adjustments in order to reestablish and restart global economic exchange. This is quite understandable given the high concentration of GVCs in the region and that it was strike by COVID-19 before other parts of the world. This region was also in the middle of a historic transformation of investment and manufacturing when the crisis strikes.
As organizations are looking for ways to retrieve from the effect of the pandemic, new measures and perspectives are being utilized to restore activity and prevent future damage.
While the World Economic Forum has underlined the requirement to set up common denominators like open ports, new clear norms for sanitation and quality and the facilitation of customs processes, sanitary and quality standards, realizing any of these functions would be tough without re-storing global governance.
Global governance specifies the capability of companies, industries and states to synchronize their actions in order to handle problematic situations. Global governance and reliable communication are necessary to operate GVC properly.
GVC and IoT
Industries are switching fast from accessing the situation to implementing scales to prevent more damage. One of the essential ways to put back the specific functioning of GVCs is to look in the transition to a supply chain empowered by IoT.
IoT enabled supply chain is all about the smart interconnected network that binds together various tiers of suppliers, service providers, manufacturers, customers and other participants of the process who are physically situated in several countries or even on various continents.
Controlling transportation and logistics for trade is extremely required in the present global value chain disruption and action is required now. The intelligent network where data will be processed, simplified and shared with the support of distributed technology will come with various added advantages.
IoT will help to become free from visibility gaps and enable for a substantial level of flexibility into operating the network. It is because of present advances in communication technology, there is also a huge selection of tools available that make remote cooperation and industry a real and viable possibility: from messaging and project management apps up to professional time tracking tools and more.
IoT and AI are still new conceptions; there has been a general consent in the industry for quite a while that a transition to a digital prototype is the best solution for improved efficiency.
This comparatively new concept means that companies have to adopt digital technologies, containing the Internet of Things (https://www.hiotron.com/) and artificial intelligence (A.I.), to predict disruptions in the supply chain and find different production sites and businesses ready to get into the production line.
As more organizations at every level of a GVC operation identify the advantages of digitalizing their cooperation and production networks, we may observe an essential transformation in a global economy that, in addition to controlling the fallout of the pandemic, could lead to the generation of a more stable, productive and feasible production model.
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