Bindiya Vakil, Resilinc CEO, explores the impact of COVID-19

The chip shortage crisis that began in 2020 has disrupted the supply of virtually everything we use in our daily lives. The rapid growth in demand for electronic devices, due to remote working, online education and the increased use of technology especially, has outstripped supply. 

Shortages and limited production capacity have also hit the automotive sector. Moreover, some commodities like steel, palladium or nickel essential to semiconductor production have been impacted by the attack on Ukraine. 

While this has caused a range of problems for businesses, others have risen to the challenge of solving them. 

Bindiya Vakil is the CEO and founder of Resilinc, a world leading supply chain mapping, disruption sensing and data analytics solution company. As a graduate of MIT with a Master in Supply Chain Management, Vakil previously worked at Broadcom and Cisco. She is a founding member of the Global Supply Chain Resiliency Council and a member of the Advisory Board of the MIT Centre for Transportation and Logistics. She founded Resilinc in 2010 and now having worked in the sector for over 20 years, she has a wide understanding of supply chain risk management and supply chain resiliency.

Over a period of 12 years, Resilinc has mapped suppliers and sub-tier suppliers across 200 countries and now offers insight into data spanning 1mn sites and 4mn parts and raw materials. 

“What’s more, with the help of our knowledgeable experts, we issue special reports including extensive data, key conclusions and practical tips for strengthening manufacturing supply chains.”

Global shortages impacting manufacturing

Prior to the conflict, Russia accounted for 37% of the global supply of palladium, vital to the metal connections between semiconductors and circuit boards. 

“In fact, 90% of the world’s production of neon gas, also used in semiconductor manufacturing, originated in Ukraine prior to the invasion,” explains Vakil. “This has put an additional strain on existing supply chains as alternative sources are rare.”

At present, however, the situation appears to be more stable, but while some industries are showing signs of recovery, others are still in trouble. 

“Advanced chips in particular will remain highly sought after and shortages are expected to persist through 2023 and into 2024,” says Vakil. “With a significant number of advanced chips produced in Taiwan – which had a 66% market share in 2022 – supply will continue to be focused within a few countries, namely Taiwan China and the United States.”

Through her experience, Vakil knows how to support global supply chains: Gaining deep multi-tier supply chain visibility, maintaining good supplier relationships and implementing advanced monitoring and planning techniques.

“These are all effective ways to identify potential risks and take timely action to mitigate any losses,” she says. “What’s more, investing in technology-based supply chain risk management solutions will improve a company's agility and responsiveness in times of crisis.”

The impact of COVID-19 on the supply chain

The COVID-19 pandemic has posed unprecedented challenges to global supply chains. Companies have experienced major disruptions from the demand side, all the way to raw materials and people labour shortages, as well as delivery delays and international trade restrictions. 

“This situation has generated tangible financial losses on a global scale,” says Vakil. “Even the largest manufacturers with end-to-end processes in place, dependent on a group of sub-suppliers spread across the globe, haven’t escaped this turmoil. 

“To make this point clearer, a three-day fire at a semiconductor plant in Japan shut down production lines for six months. The price of some chips surged from US$5 to US$110 in just a few days and this cost sourcing organisations tens of millions of dollars. Because of the pandemic, the usual safety, cleaning and maintenance procedures on site could not be carried out, contributing to a surge in factory fires post-COVID-19. A supplier risk assessment on this particular Japan site later revealed that it didn’t have automatic sprinklers or a fire suppression system.”

The Taiwan Semiconductor Manufacturing Company (TSMC) controls about a fifth of global semiconductor manufacturing capacity and yet even they have experienced shortages of materials and workers, highlighting that issues heightened by the pandemic continue to impact supply chains. 

In contrast, businesses that invested in mapping and monitoring their supply chains ahead of the pandemic emerged in far better shape. 

“COVID-19 was a wake-up call for supply chain managers. It highlighted the importance of having full visibility into their supplier networks. If companies know which suppliers, sites, components and products are at risk, they can prepare for and mitigate the effects of possible disruptive events,” says Vakil. 

Over the next 12 months, she expects to see the introduction of new legislation, as well as diversification. More and more countries will recognise the challenge in the semiconductor market, with the UK government unveiling a new £1bn semiconductor strategy to strengthen the supply chain and increase its resilience. 

“As countries try to become more self-sufficient, they invest in new partnerships, build long-term plans and expand their infrastructure as well as capacities. At the same time, while tensions between the West and China grow, decision-makers look to Japan – as evidenced by the recent announcement of the UK's semiconductor partnership with Japan – with the US looking to bring manufacturing back to American soil.

“What will be crucial for the overall situation of the global supply chain is new legislation, like the recently approved EU Corporate Sustainability Due Diligence Directive or the German Supply Chain Due Diligence Act,” said Vakil. “Businesses will need to increase their efforts in a number of areas to comply with new policies and make sure they have supply chain management practices in place. These include mapping all of their suppliers in the network, having visibility beyond the largest suppliers, and monitoring them for potential ESG risks in order to do their due diligence and comply with new regulations.”