The outbreak of the novel Coronavirus in 2019 has led to a worldwide lockdown and an unprecedented halt in manufacturing operations across countries. This has resulted in a supply disruption that was beyond the preparedness that countries had in place for usual contingencies.
Over past few decades, with increasing globalization, certain regions have emerged as the manufacturing hubs of the world. Multiple factors such as economies of scale, lower labor costs, access to technology, government support to industry, etc. have driven this trend towards concentration of manufacturing operations in select countries more than others. Growth in manufacturing has led to the development of new sea-routes for trade and consequently favorable sea-freight rates and in turn, further concentration of manufacturing. With the onset of this pandemic, the economic benefits of this strategy is being compared with the supply chain risks and consequent risk of a complete shutdown in operations that emerge from this approach. ‘Diversification’ is expected to gain increasing importance as an obvious risk mitigation measure over the decade.
The domino effect of the closure of auto industry, chemical and pharmaceutical plants, shipping and logistics in other countries were felt around the globe during early 2020. Consequently, several countries have started reducing their reliance on imports and also diversifying their sourcing centers to ensure business continuity. Several countries are expected to prioritize this geographic diversification of their supply chains. With the government focus on incentivizing ‘Make in India’ and focus on becoming the exporter to the world, India can leverage this opportunity to position itself as the ideal alternative manufacturing destination. India can also become a viable sourcing destination for the world.