Importance of creating Resilient supply chains

Importance of creating Resilient supply chains

Synopsis: The Covid-19 pandemic once again proved the importance of creating resilient supply chains that can survive the tough times.  

Introduction 

Creating supply chains that can withstand the disruptions is extremely important. Disruptions through the times is something inevitable as it can be manmade or natural. For example, The Tahoka Earthquake of 2011, followed by the Tsunami, led to a nuclear disaster caused a sharp drop in Japanese automobile exports to the United States. 

State some examples of supply chain disruptions around the world 

To avoid global disruption in the supply chain system, the robust framework is required. Causes of Supply Chain Disruption can be natural or man-made.   

  • Saudi Arabia’s oil refineries were attacked by terrorist drones resulting in a drop of 5.7 million barrels of oil per day. This caused a sudden fall in Saudi Arabia’s stock market and a rise in global oil prices. 
  • China cut off exports of rare earth to Japan after the arrest of their fishing trawler captain in 2010 near the disputed Senkakuislands by the Japanese officials.  
  • Coronavirus had an immediate effect on supply chains emanating from China.
  • The United States government-imposed restrictions on the export of microchips to China’s biggest semiconductor manufacturer. The US felt that there was an unacceptable risk that equipment supplied to it could be used for military purposes. 

How vulnerable is India to this disruption? 

China has weaponised its trade and investment. Indias’ dependency on china for the following makes it vulnerable to supply chain disruption for many imp. Goods and services in the near future;  

  • India’s pharma sector depends on China’s Active Pharmaceutical Ingredients (APIs). It creates vulnerabilities in the value chain. 
  • India imports 27% of its requirement of automotive parts from China and after the pandemic it faced a huge difficulty given the sudden shortage of braking components, electrical components, interiors and lighting fixtures. 
  • India has an import dependency of 80%even after becoming the 4th largest market in Asia for medical devices. Among the biggest exporters to India in this field are China, the U.S., Germany, Singapore and Japan. 

What are the steps taken by India and other countries to ensure SCR? 

  • The Supply Chain Resilience Initiative (SCRI) was started by India, japan and Australia which tends to focus on automobiles and parts, petroleum, steel, textiles, financial services and IT sectors.
  • Japan aimed at diversification of investments to the Association of Southeast Asian Nations (ASEAN), India and Bangladesh.
      • 89 Japanese companies availed subsidies to diversify out of China. Of these, 57 companies relocated to Japan, 30 to Southeast Asia and two to India.
  • The Indian government is providing a big boost to defence manufacturing under the ‘Make in India’ programme. It has identified a negative import list of 101 items. 
  • Australia has demonstrated strong political will in countering uninformed Chinese sanctions imposed on its key exports of grain, beef, wine, coal and much else.  
      • Australia has demanded an inquiry into the origins of the coronavirus and advocated a strong Indo-Pacific vision. 

Way forward 

India has the capacity and the potential to become one of the world’s largest destinations for investments after the pandemic gets over. 

  • There is a terrific opportunity for foreign companies to enter into tie-ups with reputed Indian defence manufacturers to tap into the growing defence market in India.
  • AtmanirbharBharat’ is aimed at strengthening India’s capacities to participate more robustly without being prey to supply chain disruptions. 

SCRI can get strengthened in the future after the involvement of France, though this might depend on the European Union’s position and the United Kingdom has also shown interest in the SCRI.

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