How Shanghai’s lockdowns are affecting global supply chains

McKinsey’s Steve Saxon explains why severe restrictions in Shanghai reinforce the importance of diversification.

China’s main commercial hub has been under lockdown since the start of April, and a map showing marine traffic around the port of Shanghai has gone viral. Awash in a sea of red dots—each representing a stationary vessel—it is an evocative image of a city suffocating in a supply chain chokehold.

In this video, McKinsey’s Shenzhen-based partner Steve Saxon, who leads the Travel, Logistics & Infrastructure Practice in China, explains why this map doesn’t quite paint the full picture. For one, to understand what’s happening to supply chains, container ships and container ports are what matter, not fishing boats and navigational buoys, which are also included in the image. In reality, the Shanghai port remains operational, albeit with about 20 percent less container volume traffic than before the lockdown.

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How Shanghai’s lockdowns are affecting global supply chains

Saxon also discusses the implications of Shanghai’s two-month-long lockdown on global supply chains, including the following:

  • Closed-loop working arrangements are limiting production levels in factories; the lockdown has hit manufacturers the hardest.
  • Cargo is being diverted due to diminished capacity: shipping containers are being sent to nearby ports, such as in Ningbo, while Xiamen is experiencing higher airfreight demand.
  • Fewer imports from China may give US ports the breathing space they need to get through container backlogs.
  • Diversification could be the key to bolstering supply chain resilience for manufacturers and shippers.

Watch the video to learn more.

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