Supply Chains Brace for Omicron Variant Effects

By Logan Wamsley

The latest variant of the COVID-19 virus, dubbed the Omicron variant, has now gripped the globe, and governments around the world have been quick to respond. Although details regarding the severity of the variant are currently uncertain — although the scientists in South Africa who first discovered the variant say observed symptoms so far have been very mild — at least 70 countries have imposed travel restrictions to several African countries. Many countries including the United Kingdom, Japan, and Australia have already reported confirmed cases. For the supply chain community, the effects of this new development are poised to be significant.

The timing could not have been worse in regards to the global supply chain. With the ongoing congestion at ports, ongoing shortages in both electronic components and semiconductors, and strict COVID-19 protocols all combined with historic product demand have led to a supply chain crisis that may not be resolved until 2023. With the rise of the Omicron variant, COVID-19 protocols in many countries are now poised to be extended — and in many cases become even stricter.
If there is a silver lining, supply chain participants, having operated in these trying conditions since 2020, are now more prepared for similar obstacles.

According Mark Zandi, chief economist at Moody’s Analytics in an interview with MarketWatch, supply-chain disruptions due to omicron — or any other new variants that arise — will disrupt global supply chains “but likely not to the same degree as the delta wave. Given the experience of delta, factories, ports, shippers and trucking companies know where the bottlenecks in the supply chain are most serious, and will thus be able to more gracefully work around them in the next wave of the virus.”

Where there is most concern is in the labor — or rather the lack of it. Commerce Secretary Gina Raimondo has noted that the news of the Omircron variant could cause a shortage of workers in several areas of the supply chain. “Some portion of that is people are afraid to go to work,” she said. “In manufacturing facilities, people work in person, close together. And there have been outbreaks. We’ve had problems in places where people work close.”

With decreased labor comes more limited supply, transportation and logistics limitations, and increased costs for buyers. Recent trends according to the U.S. administration indicate that while supply chain bottlenecks were gradually opening back up, it has acknowledged that the potential for backsliding due to Omicron could be significant. In the coming weeks, the full effects remain to be seen.