BCG Perspectives
Facts, scenarios, and actions for leaders

Future of Global Trade and Supply Chains
9 June 2020

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

COVID-19

COVID-19 will be a journey with three distinct phases, requiring
an integrated perspective
Fight

FutureTypically the initial phase after a pandemic
outbreak–goal is to urgently limit numberof new cases, especially critical care

Finding paths to collectively fight the virus,
restart the economy, and support society inbalancing lives and livelihood

Disease controlled through vaccine/cure/herd immunity, and treatment withinsustainable medical capacities possible

Social distancing (lockdown) and partial businessclosures, lead to economic recession with large
employment impact

Increasing economic activity with recovering
GDP, some business reopenings, and social
distancing on sustainable level

Reactivated economy with strong businessrebound and job growth, social restrictions
limited or completely suspended

1. Disease progression, health care system capacity, and response
2. Government policies and economic stimulus
3. Economic scenarios
4. Business engagement and response
5. Public engagement and response

All of the above five factors result in specific economic and social outcomes in each phase
Source: BCG

1

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

FlattenCOVID-19

BCG Perspectives

COVID-19 is a global
societal crisis

Leaders need to drive an integrated
response to navigate the crisis

We at BCG believe that the COVID-19 outbreak isfirst and foremost a societal crisis, threatening
lives and the wellbeing of our global community.
Society now, more than ever, needs to collaborate
to protect people's lives and health, manage midterm implications, and search for lasting solutions.

It is the duty of health, political, societal, and businessleaders to navigate through this crisis. A complex
interplay of epidemic progression, medical response,
government action, sector impact, and company
action is playing out. This document intends to help
leaders find answers and shape opinions to navigate
the crisis in their own environments. It encourages
thinking across the multiple time horizons over which
we see the crisis manifesting itself.

Source: BCG

2

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

Objectives of this document

COVID-19 accelerates ongoing global trade shifts; strengthening supply chain resilience is critical in the new reality• While global trade grew to a record value of $18 trillion in 2019, COVID-19 is likely to negatively impact future trade• Total trade volume may potentially recover to pre-COVID level only by 2023; however, with substantial shift in volumes across corridors• Companies should act to improve supply chain resilience; drive end-to-end visibility, streamline complexity, and implement shock absorbers• It is also critical to evaluate supply chain tradeoffs to rebalance priorities; secure access to resources, respond to demand shifts, and improvesustainability• Many companies are already starting to adapt supply chains; global, migrated, and regionalized designs have emerged as distinct models
Across countries, efforts to flatten curve and ramp-up testing continue; equity markets and industry sectors show signs of recovery• Globally, 2.8 million patients have recovered from COVID-19, but growth rate of daily new cases has increased to ~2%1
• Global increase in daily new cases is propelled by South America, Asia, and Africa, while Europe and North America continue to improve• Vaccine and therapeutics development continues to move at unprecedented pace; nine vaccine candidates in phases I, II & III• Rebound of global GDP is not expected before 2021; but global equity markets recover rapidly and all sectors show positive TSR2 trend• 20-45%+ of employees in major economies continue to be affected; but US report strong decrease in unemployment insurance claims

We believe during
this crisis leadersneed to think along
two dimensions:

Taking an integrated perspective on
health/medical progression,
governmental responses, societal
reactions, and economic implications
to understand business/sector impacts

Thinking multitimescale in a
Flatten-Fight-Futurelogic

1. Daily new case growth rate is calculated basis 7 day rolling average; daily case growth rate is 2.2% as of 05 June and was 0.9% as of 29 May; 2. Total Shareholder ReturnSource: BCG

3

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

Executive Summary | COVID-19 BCG Perspectives

Guide for leaders
Building resilience in supply chains

Updated analyses and impact
Epidemic progression and virus monitoring
Economic and business impact

4

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

Macro view on future of trade

COVID-19 Impact dashboard
As of 05 June 2020

Economic Impact

6.8M

2.8M

396K

GDP forecasts [%]# of cases# of recoveries# of fatalities

2020

Growth rate1 of daily
new cases# of days of casedoubling2

22 May29 May5 June

1.5%

0.9%

2.2%

35

37

36

# of reported recoveries
as % of total cases

39%# of tests / case3

15

17

18

# of tests / million3

34K

44K

48K

Trials in pre-clinicalstage and beyond4
Trials in Phase 1 andbeyond5
Current estimatedtimeline for approvaland scale-up

42%

41%

Europe

-5.9%

US

-5.2%

Japan

2.0%
0.7%
1.2%

China

8 10

Stock market performance11
20 Marvs 21 Feb

-31%

-28%

-30%

-34%

-10%

05 Junevs 21 Feb

-4%

2%

-12%

-5%

-4%

DAX

CHN SSE

S&P500 NASDAQ FTSE100

Total Shareholder Returns11
6.0%
First column: 21 Feb to 20 Mar; Second column: 21 Feb to 05 June

1.9% 5.8%

India

Estimated employment impact9
Total employment
Employees% of employees
2019 (M)
impacted10 (M)impacted

Americas

EuropeAsia

Pharma-19% 2%-20% -4%-22% 9%F&B12-26% -9%-24% -11%-12% 0%

Telecom-17% -6%-20% -14%-14% -7%

Software-30% -3%-32% -9%-28% -7%

43

27%

Retailing-42% -7%-36% -10%-24% 10%

UK

33

10

29%

Capital goods-38% -7%-35% -11%-29% -2%

Germany

45

12

26%

Auto

-47% -7%-45% -9%-32% -7%

53

France

28

13

47%

Real Estate-42% -22%-26% -20%-22% -10%

6-21

Italy

23

8

35%

Energy-56% -23%-45% -20%-41% -22%

Spain

20

4

22%

Banks

-41% -19%-44% -28%-26% -9%

159

126

6-33

-10 -8 -6 -4 -2 0 2 4 6-7.5%8Baseline 1.3%9

Banks

159

Treatment

months6

IMF

US

Vaccine9

Business Impact

months7

1. Growth rate calculated basis rolling 7 day rolling average of new cases; 2. No. of doubling days based on 7 day average growth rate of total cases; 3. Median of values for top 15 countries by nominal GDP (except China); 4. Ongoing trials including pre-clinical, Phase 1 (first trial in humans), Phase 2, Phase 3, Phase 4 ; 5.
Ongoing trials including Phase 1(first trial in humans), Phase 2, Phase 3, Phase 4; 6. 6 month development current "best case" (9 months since Apr 2020), then likely to require time to scale across population; 7. Remdesivir is approved now, could be more widely available by Jul-Sep 2020. For the next wave, estimatedtimeline is Oct '20 – April '22 (6-21 months). If first round of drugs being tested succeeds – then 6-9 months; if not – substantially longer; 8. For India, forecast is for financial year; for others, it is for calendar year; IMF April 2020 forecast; YoY forecasts; Range from forecasts (where available) of International Monetary Fond,JP Morgan Chase; Goldman Sachs, Morgan Stanley; Bank of America; Fitch Solutions; Credit Suisse; Danske Bank; ING Group; HSBC; As of reports dated 12 April 2020 to 5 June 2020; 9. IMF January 2020 forecast; 10. Available data as of 05 June 2020; Includes increase in unemployment and employees covered bygovernment's wage support programs; numbers are cumulative from mid of March 2020; US: unemployment insurance claims; UK: unemployment and inactive people, Data only available from end of March; Germany: short-time work requests, not actual used short-term work; Italy: unemployment and inactive people;
figures are changing rapidly and often being reported with a lag from the current date; 11. Performance is tracked for two periods, first from 21 February 2020 (before international acceleration of outbreak) to 20 March 2020 (trough of the market) and from 21 February 2020 through 05 June 2020; 12. Food & Beverage.
Source: WHO, World Bank, JHU CSSE, Our World in Data, IMF, Bloomberg, BCG, Eurostat (Europe), Gov't Wage Support & Unemployment figures & comments: UK Govt 5/12 (UK), ISTAT 4/30 & FitchRatings 5/18 (Italy), U.S. Department of Labor 5/21 (US), Ministerio de Trabajo 6/2 (Spain), Ministere du Travail 6/5(France), Arbeitsagentur 6/3 (Germany)5

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

Epidemic Progression

Pre-COVID-19, global trade grew, sustaining a record $18 trillion in value
Change in value of global trade of goods from 2015 to 2019 (Major corridors, $B)
Data on map represent ~30% of global trade; Not shown: Intra EU=~20%, NAFTA=~8%, China/Hong Kong=4%, ASEAN=3%, RoW=~35%

$18T

EU

Global trade total

124

74

135

USA

30
-40

3.8%

-2

CAGR1

$ 15.7 T$ 18.2 T

18

42
47

25

Arrow color representschange 2019 vs 2015
-3% to
<-3%
>+3%
+3 %

2015

India

-12

Mercosur 40

17

China

27

Japan/Korea

120

43

ASEAN
57
-13

Africa15

10Australia

2019
1. Compound Annual Growth Rate; Note: 2019 figure of $18.2T followed a 2018 record figure of $18.3T
Source: UN Comtrade, OECD, WEF, IHS, TradeAlert, BCG

6

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40

US-China dynamic had already shifted import sources in 2019
ASEAN

India

China

JP/KR1EU

MexicoBrazilTurkey

RoW3

World

Biopharma

-19%

19%

-14%

10%

17%

-6%

-7%

1%

2%

10%

MedTech

23%

9%

-2%

-2%

5%

11%

31%

-13%

5%

6%

Consumer Durables

33%

10%

-19%

6%

3%

1%

26%

1%

5%

-4%

Fashion & Luxury

12%

5%

-11%

2%

3%

-6%

-3%

8%

5%

0%

Packaged Food

6%

15%

-36%

11%

6%

10%

-8%

13%

4%

4%

24%

-13%

-25%

9%

14%

108%2

138%2

15%

-8%

Tech, Media& TelcoConsumer Electronics
Equip. & Data Center
Solutions
Semiconductor & Materials

100%2

-2%

-12%

-31%

-19%

-2%

-4%

23%

-45%

69%

-13%

14%

36%

-53%

-3%

-7%

-14%

-41%

33%

-3%

0%

EnergyEnergy

-40%

18%

-68%

34%

3%

-19%

-2%

10%

-14%

-13%

Aerospace

-14%

39%

-9%

3%

18%

21%

31%

21%

12%

13%

Agribusiness

-8%

0%

-23%

9%

3%

10%

6%

-13%

1%

1%

Automotive - Components

24%

1%

-17%

1%

-1%

2%

-4%

10%

0%

-2%

Automotive - Vehicles

12%

4%

-19%

1%

-2%

11%

-36%

-12%

1%

3%

Chemicals

11%

10%

-16%

4%

-1%

5%

0%

7%

-7%

-4%

Electrical machinery

10%

21%

-18%

1%

3%

7%

14%

11%

7%

-3%

Mechanical machinery

13%

6%

-37%

3%

2%

5%

9%

22%

10%

-7%

Metals

2%

-1%

-15%

-1%

-4%

-2%

-12%

-31%

-8%

-7%

Mining

-38%

5%

-22%

10%

-27%

30%

16%

-2%

2%

2%

Non-metal building materials

45%

38%

-29%

6%

0%

6%

3%

21%

0%

-4%

% change< -20%-2% to -20%

% change in goods imports ('18–'19)
Health Care
ConsumerGoods

Industrial
Goods

1. Japan, South Korea 2. Growing from a very low base in 2018; 3. Rest of World
Source: IHS Markit Global Trade Atlas Global Trade Atlas; BCG & GTI Team analysis-2% to +2% +2% to +20%

> +20%
7

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

US Example

COVID-19 is accelerating previous trends toward more restrictive tradeGDP
performance• Economic recession• Uneven economic growth

Geopoliticalorientation• "Managed Trade"regimes• Protectionism/
Nationalism• Restrictions on migration

Supply chain
tradeoffs• Multi-local sourcing,higher safety stocks• Inaccessible low-costlabor supply• Faster adoption of
automation/robotics

Source: BCG

Pre-COVID-19 Status

Tend to increase trade• Deep recession• Structural damage• US-China de-coupling• Health & agriculture tradecontrols• Multi-local
manufacturing• Cost and resiliency

2020-23F post-COVID
scenario range and examples• Economic expansion• Balanced global growth• Multilateral trade
agreements• Globalist policies• Freedom of movement• Global sourcing, just-intime inventory• Accessible low-costlabor supply• Slower adoption of
automation/robotics
8

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

Tend to decrease/shift tradeResponding to COVID-19, governments are rolling out measures to protect
domestic industries, localize supply chains, and attract private investment flows"Cabinet approves Rs 40,995 crore
production linked incentive
manufacturing scheme to make India
electronic manufacturing hub"

US should have a 'couple hundred
million' doses of a Covid-19 vaccine by
the start of 2021, Fauci says

Source: CNBC, Stat, LiveMint, Bloomberg, Reuters, DW, CNN, The Korea Herald

9

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As of 05 June 2020

Total trade can potentially recover to previous level by 2023;
however, with substantial shift in trade volumes across corridors
Projected global trade

Base case scenario: Change in value of trade of goods, 2023 vs 2019 (Major corridors, $B)

Value in 2023

Data in map represent ~32% of global trade. Not shown: Intra EU=~20%; NAFTA=~8%; China/Hong Kong=4%; ASEAN=3%, RoW=~32%$21T

Optimistic
case

EU
21

$18T
$13T

Base case≈2019 global
trade

Pessimistic
case

USA

5
1
-128

-30
China

12

8

-1

-4

22
26

India

-14

Mercosur 6

11

Color of arrow represents-3% to>+3%change 2023F vs 2019
+3 %

1

41

-6

ASEAN

Africa<-3%

Japan/Korea

-11

-4

17
Australia

GrowthDeclineSource: BCG Trade Finance Model 2020, UN Comtrade, OECD, WEF, IHS, TradeAlert, BCG Analysis

Star represents biggest
changes 2023F vs 2019 (%)
10Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

-6

Sector impact example | Future biopharma supply chain may change
given government mandates and impetus for diversification
Illustrative

Future – depends on product type and local government actions

Example Pharmaceuticals | Trade
Import/Export Selected trade routes1, $B 2019
199
US
JP/KR
India

EU

199

Potential
impact

40
13

96

121

25
2

10

Essential biopharma2

Non-essential biopharma4• Local/regional sourcing of
excipients, API• Increase in drug products
inventory “close to customer”• Addition of local/regional sites
for key drug products• Capacity expansion/
optimization of existing facilities• Improvement of forecasting andvisibility• Multi-sourcing of inputs;
geographical diversification• Increase inventory of both WIP
and finished goods• Backup or parallel mfg. sites incase of disruptions• Expansion of regional warehouseand distributor networks• Improvement of forecasting andvisibility

Government mandates3 or
incentives to ensure
access to essential medications

High impetus to change in order toprotect high-margin products, butchanges long and difficult

40

China
ASEAN

11

4

Exporter

28
8

Influencing
factors

Importer

1. Figures represent trade volumes between selected geographies only, and exclude API 2. Vaccines, antibiotics, anti-virals, etc. 3. Essential-biopharma supply chain highly dependent on occurrence and nature ofgovernment policies; reality of supply chain design highly dependent on details of country-specific regulation and may not resemble the example shown 4. Wide range of products w/o national security
implications

11

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Today – highly globalizedCompanies should take immediate actions to increase current supply chain
resilience, and evaluate design tradeoffs to rebalance priorities in the new reality
FlattenFight & Future

Actively drive
workforce safety

A

Develop stop-gap
measures forcontinuity

•
•
•
•
•

Mandate end-to-end visibility through control tower
Enhance capabilities of Sales & Operations Planning through analytics
Integrate more closely with suppliers and customers
Streamline complexity
Implement "shock" absorbers (e.g., inventory)

Evaluate supply chain design tradeoffs to rebalance priorities
Perform scenario
stress tests arounddemand, supply issues

Source: BCG

B

•
•
•
•
•

Ensure resilience to future disruptions
Secure access to resources and markets
Drive cost efficiency
Respond to demand shifts and revised service requirements
Double-down on sustainability efforts

12

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Take immediate actions to increase current supply chain resilienceImmediate action | Five focus areas support more efficient supply chain ops
MandateE2E visibility

3

Build control tower
Establish governancefor fast response

2

Source: BCG

Integrate more closely with
suppliers and customers

5

Implement "shock
absorbers”

Connect closely withkey stakeholders

Maintain critical inventory close
to market

Integrate planning
efforts across supply
chainsStock key raw materials as buffer

Enhancecapabilities

Optimize for the near term

4

Streamline
complexity

Enhance S&OP to
manage volatility

Reduce low
value/volume SKU

Leverage analytics
for real-time
demand sensing

Increase plant
efficiency

X

For further reading, please refer to
13
The New Reality for Chief Supply Chain Officers

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

1

A

A central control tower can aid complete end-to-end visibility of the
supply chain, and supplement informed decisions

A1

Potential value impact

Service improvement

10-15%
Savings across end-to-end supply
chain and cost of quality

Build a central "control
tower" to gain visibility
into end-to-end data from
customer to supplier
Source: BCG

Establish a governancestructure to address
immediate and midterm
issues…

Use newfound visibility
to make more effective
decisions and resolve
outstanding issues

5-20%
Working capital improvement

14

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

8-15%

Digital twin can help simulate scenarios, and model supply chain
performance to manage demand and supply volatilities

A2
Illustrative

FLOWS

Virtual replica to simulate SC performance• Model multiple configurations to manage
volatility of demand and supply
Probability-based view of future flows• Scenario creation for different demand
patterns and order-book

PRODUCTION

Asset flows
Liquidsteel

Hotrolling

INVENTORY
Low production utilization

Increase warehouse capacity
Area
Issue
Lead time
ImpactEffortWarehousing
Inventory
3 weeks

Addt'l external warehouse
Risk of disruption
highmediumlow

Value add

Source: BCG

Finished
goods

Addt'l rolling & coating steps

Warehouse flows

Dynamic reconfiguration of flows• Optimize manning/warehousing/logistic
cost• Improve service levels and inventory• Reconfigure demand mix and allocation

MITIGATION ACTIONS

Area
Issue
Lead time
ImpactEffortWarehousing
Capacity
3 weeks

Produce more export earlier
which can be shipped earlier

Max. warehouse capacity
0 weeks

2

4

6

8

10

12 weeks

Area
Issue
Lead time
ImpactEffortWarehousing
Input
2 weeks

15

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What it is

Example - European steel production company
Risk of warehouse capacity limiting production utilization identified four weeks in advanceCompanies are leveraging category and supplier intelligence tounderstand exposure and manage supply chain risks
As of 15 May 2020

A3

Global metals & mining company example
Illustrative

Supplier intelligence

Assess exposure

Evaluate supply chain risk of identified supplier

Determine focus
categories(failure criticality)

Mitigation plan

Prio 3 SupplierPrio 2 Supplier

Risk:

High

Prio 1 Supplier

Moderate

Low Sub-supplier location

Pull forward orders ofcritical materials

OEM location

Analyze supply risk of
categories (origin andfailure probability)
Quantify value at risk
(inventory, substitution,
etc.)
Prioritize focus
categories with their
suppliers
Source: BCG

City 1Japan

Significant Covid-19 risk with highspread ratio for product 1,2,3

Port
Japan

Strong reliance on port for
shipment; high COVID-19 spread
ratio impacting operations for
products 3,4,5City 2
Japan

High COVID-19 spread ratio;
experiencing higher port
congestion due to air to sea shift
for products 2 and 4

City 3Japan

Distribution and production
facility

City 4Australia

Distribution center

Change payment terms to
incent priority delivery
Increase lead times onorders and shipping
Establish alternative
vendors

16

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Category intelligenceCompanies should holistically evaluate supply chain tradeoffs
to rebalance priorities for the new reality

Ensure resilience
to disruptions

Secure access toresources & markets

Drive
cost efficiency

Respond to demand
shifts & revised
service requirements

Reduce exposure toconcentration risk

Develop access to newmarkets, secure current
access

Accelerate automationto achieve cost
efficiency1

Track demand shifts; build
platform for real-time
customer communications

Reduce CO2 emissions:less waste, more green
tech, EH&S2 integrity

Restructure supply
chain for new reality

Diversify geographic
and supplier access of
key resources, drive
future optionality

Leverage changes inlogistics costs anddutiesDifferentiate throughdelivery performance

Redefine offerings to
optimize upstream,
downstream footprint

Increased focus expected
in light of COVID-19
1. Capture factor cost differentials from scale effects, inventory levels; 2. Environment, Health & Safety
Source: BCG

Improvesustainability

Opportunity to redesignin sustainable manner

17

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B

B

Build a resilience dashboard to guide actions across the supply chain
Specific KPIs depend on industry & value chain position

Make

Benchmark12 months rolling avg.

0%Company

Q2, M, Q3

50%

100%

DeliverCompany Q2, M, Q3

Benchmark12 months rolling avg.

0%

50%

100%

12 months rolling avg.

% sourcing fromcountries at risk

% mfg. capacity in
end-market/region% revenue from highrisk markets% inputs regionallysourced% production
outsourcing% distribution coveredby largest distr.
partner% critical inputs w/ backup/redundant suppliers% products//lines
qualified in 2+ facilities% of inventory held in
end-market

Per calendar week (CW)

CW20

CW21

CW22

Per month

03/20

04/20

05/20

Per calendar week (CW)

Avg. lead time fromsupplier to mfg. site

% utilization of plant
network

Avg. lead time fromplant to customer

Days of inventory of
key inputs (average)

Productivity of plant
employees (lvl. of autom.)Days of inventory of
final goods (average)

Source: BCG

Company Q2, M, Q3

Benchmark
0%

50%

CW20

CW21

100%

CW22

18

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SourceIllustrative

B

Increase resilience by pulling a comprehensive set of levers
Manufacturing network
Make

Channels & customers
Deliver

Optimize inventory of raw
materials and components toincrease resilience

Qualify backup contract
manufacturers to handle
disruptions

Optimize inventory of finishedgoods to increase resilience

Reallocate supply mix between
existing suppliers in alternate
geographies

Expand manufacturing
capabilities to increase flexibility

Add new distribution partners

Influence suppliers to shift mfg.
base in alternate geographies

Resize existing plant network toincrease backup capacity

Rethink transportation
modalities mix (e.g., air vs.
ocean)

Qualify new suppliers to increase
diversification

Re-shore or regionalize own
manufacturing facilities footprint

Rethink distribution strategy(e.g., outsource vs. insource)

Source from new suppliers inalternate geographies

Rethink make vs. buy strategy

Shift warehousing/DCs closer toend market

Speed of change depends on specific company and industry andmay vary between few months and several years
Source: BCG

19

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Supplier ecosystem
SourceB

Example | Advanced analytics capabilities can boost supply chain goals

Resilience

Sustainability

Concentrationof suppliers<40% of key components sourced fromselected geographies

Supplier distance>75% of key components with lead delivery
time of 2 days to mfg. sites

Size of plant<85% of plant network utilization given
demand scenarios

Mfg. redundancy
for key products>30% of key products qualified in 2+ mfg.
sites, in different geographies

Make vs.
buy strategy<15% outsourced production for selected
key products

Inventory levels
in end-market>21 days of inventory of finished goods inselected sales markets

Carbonfootprint

10% reduction in overall carbon footprint
20

Source: BCG

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Advanced
Network
Optimization

Design dimensions

Illustrative

B

Companies already starting to adapt supply chains; three models emerge

Global supply chains

Migrated supply chains

Regionalized supply chains

Limited footprint changes due to costand access constraints; digital
enablement for agility

Shift manufacturing to new
location to reduce geopoliticalrisk exposure

Move closer to end-markets, due togovernment restrictions/ incentives

3

1

3
2 3

3

1

3
3

3

3
2

1
2

2 3

2
1

1

1 Sourcing-

2 Manufacturing

1

1

3 Distribution

Degree of change

1. Starting point and speed of change will vary significantly between industries, i.e. some industries will start and/or finish within few months, others within the next years
Source: BCG+
21

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Illustrative example for a firm traditionally manufacturing in Asia and selling globally1

B

Outcomes will look very different across these models
Illustrative

1

3
2 3

3

1

3
3
2

1

What
resilience
may look
like

Illustrative
examples
Source: BCG

1

3

3
2
1

1
2

2 3

1

Global supply chains

Migrated supply chains

Regionalized supply chains• Diversified networks- Back-up suppliers acrossgeographies- Alternate qualified
facilities• Large automated sites (I4.0)• E2E visibility to react quickly• Strong risk management• Large-scale footprint shift- Rebalance supplier mix, to lessexposed geographies- Moving manufacturingsites• Large automated sites (I4.0)• E2E visibility to react fast
• Trained and upskilled workforce• Regional footprint including- Supplier mix across multiple
regions- Manufacturing sites, incl. backup capacity• Cost-efficient sites (I4.0)• E2E visibility across network• Trained and upskilled workforce

Low-value electric motors mfg.
with global SC and automatedsites

Apparel manufacturer moving footprint
from one Asian country to another

Biopharma firm reshoring part of
drug production to the US

22

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

3

Guide for leaders
Building resilience in supply chains

Updated analyses and impact
Epidemic progression and virus monitoring
Economic and business impact

23

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

Macro view on future of trade~2.8M reported recoveries globally so far;growth rate of daily new cases has worsened to ~2%

EPIDEMIC PROGRESSION& VIRUS MONITORING

As of 05 June 2020

UK

22nd May'20

Russia29th May'20

05th June'20

Italy

USA

China
Iran
India

Japan
South
Korea

95K

101K

(∆1.5%)(∆0.9%)

118K(∆2.2%)# of daily new cases (growth rate%)1
Brazil35
8
days
Days of doubling cases:
0-3 days

185
Countries with cases3

37
12
days

36
12
days

# of days of case doubling2 globally
3-6 days

6-14 days

6.8M[∆1.9%]4

Confirmed cases globally

14-30 days

396k

>30 days
2.1M

2.5M

2.8M

(39%)

(42%)

(41%)

[∆1.2%]4

Fatalities globally

Total # of recoveries (as % of confirmed cases)

Note: Continued cases and fatalities are subject to different testing, propensity, reporting standards and hence are imperfect measures
1. # of daily new cases calculated as 7-day rolling average; growth rate calculated basis 7-day average; 2. No. of doubling days calculated basis 7-day average growth rate of total cases; 3 Basis Johns Hopkins
CSSE; 4. Daily growth rate basis 7-day average
Sources: Johns Hopkins CSSE; Our world in data; WHO situation reports; BCG

24

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

FranceSpain

Daily new cases are increasing globally;
propelled by South America, Asia, and Africa

EPIDEMIC PROGRESSION& VIRUS MONITORING

As of 05 June 2020

Several European and North American countries
continue to improve doubling rate…

Fight

Daily growth rate of total cases (seven-day average)
6%

Daily cases (seven-day rolling average)
120,000

S Africa

Kenya

Cases doubling:
14 daysEgypt

5%

Colombia

India

BrazilChile

4%

Argentina

Nigeria3%

Mexico Cases doubling:
21 days

SwedenIranAlgeria

1%
0%
1,000

Russia80,000Asia
North
America

40,000AfricaSingapore

USJapan Canada France UK
Germany Italy
Belgium China
S Korea
Austria
Spain
Australia

10,000South
America

60,000Ghana

2%100,000

100,000

1,000,000

20,000Europe

0

Apr

Mar

May 05 June

Cumulative number of confirmed cases (log scale)South America

Asia1

Africa1. Includes Middle East & Oceania
Source: Johns Hopkins CSSE; Our World in data; BCG

North America

EuropeSouth America

Asia1

AfricaNorth America

Europe25

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

Rates improving from top to bottom

Flatten... but countries in South America, Asia, and Africa
witness an increase in daily new cases

EPIDEMIC PROGRESSION& VIRUS MONITORING

Epidemic progression snapshot

Data shown only for G20 countries with 100+ daily new cases

Daily cases
Growth of daily new cases1

S Africa

7.1%

Brazil

4.7%

India

3.7%

Cumulative cases

Testing

Daily Cases/M

Total cases

RecoveryNew cases per
million population2

In thousands% of total cases

32

41

53%

119

615

45%

6

227

48%

Mexico

1.5%

27

106

71%

US

0.6%

65

1,873

26%

Russia

0.1%

61

441

47%

Test/ casecurrent value3
10

0

2

19
3

\

32%

\

Argentina

-0.6%

14

19

29%

10

91%

Turkey

-2.0%

11

167

79%

KSA

-2.2%

53

93

74%
55%

Canada

-4.5%

20

94

UK4

-5.2%

26

282

France

-5.2%

7

152

36%

5

234

69%

Italy

-6.8%

11

\

29
183

\

\

2
5

\

\

-0.3%
-2.0%

2 weeks ago
20
30

21

Indonesia
Germany

\

27

9
\

\

14

\

10

\

19

\

12

\

\

24

9
\

18

1. Growth rate calculated basis 7-day rolling average of new cases; 2. 7-day rolling average; represented scale rounds up daily case/m to next 10th place; 3. Test/case data is not updated daily for few countries,
data represented is within last 1 week; 4 UK recovery data not available; Source: Our World in Data, John Hopkins, Worldometers, BCG

26

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

As of 05 June 2020

As countries further relax lockdown measures,continued testing capacity ramp-up is critical

EPIDEMIC PROGRESSION& VIRUS MONITORING

As of 05 June 2020

As countries ramp-up testing capacity..

..they need to plan to move beyond testing symptomaticpatients to greater degrees of population monitoring

Daily new cases per million population1

Overall testing level required

120

Brazil

Bubble size represents
total cumulative cases/M(Here 2000 cases/M)

Singapore

Flatten

Sweden80

Fight

FutureCritical toadvance in fight stage

United States
65
32

South Africa
MexicoUnited Kingdom

20

CanadaBelgium
France0Highestimmediatepriority

Spain
Italy India

Switzerland

0

10South America

Japan

IsraelGermany
Australia
Malaysia
South Korea
Iceland

20
Asia2

30
AfricaDiagnose
symptomaticpatients

Test allcontacts ofpositive
cases

Surveillance ofhigh risk andmost vulnerable
populations

80
220
Total tests / Total cases

North America

Broadpopulation
surveillance

Futurepriority
Test3 forimmunity invaccinatedpatients

Time

Europe1. Taken as 7-day rolling average; 2. Includes Middle East & Australia; 3. Tests for testing immune response to vaccines may be different from current ones to test infection
Source: Our World in Data, Worldometer, BCG

27

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

Non-exhaustiveVaccine fast movers | 9 vaccine candidates already into clinical trials

EPIDEMIC PROGRESSION,EPIDEMIC PROGRESSION
VIRUS MONITORING, && VIRUS MONITORINGHEALTH CARE CAPACITY

1

Phase II/III

4

Phase I/II

Oxford Univ. & AstraZeneca

BioNTech & Pfizer

China National Biotec3

Phase III recruitment underway;
concerns1 over effectiveness on rhesus
macaque monkeys in May 2020

Trial ongoing in Germany;
if approved, distribution
possible by Oct-Dec 2020

Trial started in Apr 2020;
expected completion of
final trials by Nov 2021

Novavax

Sinovac

Trial started in Apr 2020;
expected completion of
final trials by Nov 2021

Trial started in Apr 2020;
expected completion by
Aug 2020

2

Phase II

CanSino Biologics
Phase II advancement since Apr
2020; follow-up expected by Oct
2020

2

Phase I

Moderna

Chinese AMS4

InovioPositive signs2 from Phase I trials
in May; further wide-scale trials
being planned

Trial started in Mar 2020;
follow-up expected by Dec 2020and completion by Apr 2021

Trial started in Apr 2020;
larger studies possible in
Jun-Aug 2020

150

Pre-clinical

159

Total

"By the beginning of 2021, we hopeto have a couple of hundred million
doses. I'm cautiously optimistic withthe multiple candidates we have withdifferent platforms."
Dr. Anthony Fauci, Member, WhiteHouse Coronavirus Task Force

1. Trial of the vaccine on rhesus macaque monkeys did not stop the animals from catching the virus and has raised questions about the vaccine's likely human efficacy and ongoingdevelopment; 2. Vaccine showed signs of creating immune-system response to fend off the virus – on a small sample designed to look at safety of the shot on human volunteers; 3. Listed as twocandidates by WHO: Beijing institute of Biological Products / Sinopharm & Wuhan Institute of Biological Products / Sinopharm; 4. Academy of Medical Sciences and Institute of Medical Biology
Source: WHO (June 2nd), Citeline Pharma Project (June 5th), Milken Institute (June 2nd), ClinicalTrials.gov (May 19th), Telegraph, Bloomberg, BCG

Update in last 2 weeks

28

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

As of 05 June 2020

Economic forecasts point toward severe downturn in 2020;
rebound of global GDP not expected before 2021

ECONOMIC &BUSINESS IMPACT

As of 05 June 2020

GDP level forecast1

GDP growth forecast vs. baseline

EOY 2021 vs. EOY 20192021

-10% -8% -6% -4% -2% 0%
Forecast -5.9%

2%

4%

6%

8% 10%-10% -8% -6% -4% -2% 0%Baseline 2.0%

2%

4%

6%

1.7%

4.7%

8% 10%

US

96-100%
Forecast range
-7.5%

1.3%

1.4%

4.7%

Europe95-99%
1.2%

6.0%

5.8%

9.2%

China

107-112%
-5.2%

0.7%

0.5%

3.0%

Japan

95-99%
1.9%

5.8%

6.5% 7.4%

India2101-108%
Forecast IMF (Apr 2020)

Baseline IMF (Jan 2020)

Forecast range Banks3

Note: As of reports dated 31 March 2020 to 05 June 2020, YoY forecasts 1. Range calculated with 25th & 75th percentile values of forecast range 2. For India, forecast is for financial year; for other countries, theforecast is for calendar year; 3. Range from forecasts (where available) of International Monetary Fund, Goldman Sachs, JP Morgan Chase; Morgan Stanley; Bank of America; Fitch Solutions; Credit Suisse; Danske
29
Bank; ING Group; HSBC; Source: Bloomberg; IMF; BCG

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 8 May 2020 Version 5.1.

2020

Global equity markets recover rapidly;
US unemployment insurance claims have declined

ECONOMIC &BUSINESS IMPACT

Global equity markets recover rapidly;
NASDAQ already at all-time highWeekly number of seasonally adjusted US
unemployment insurance claims have declined

Cumulative returns until 05 June (%)

Initial US unemployment insurance claims (millions per week)

S&P500

NASDAQ

DAX

FTSE

5%

China SSE

8

6.8M

0%
-5%

6

Unemployment insurance
claims in week of 28 March

-10%
-15%

4

-20%
-25%

2

-30%
-35%
21 Jan21 Feb

21 Mar

21 Apr

Source: OECD, UNCTAD, US Bureau of Labor Statistics, BCG

21 May0 01.07.2019
01 Jul 2019

1.9M
Unemployment insurance
claims in week of 30 May
01.01.2020
01 Jan 202001.07.2020

30

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

As of 05 June 2020

Industrial production and global trade disrupted
due to COVID-19 crisis

ECONOMIC &BUSINESS IMPACT

US

Industrial
production
Tracked as y-o-ychange in output ofindustrial sector1

Germany

Russia

UK

Italy

China

Japan

-5%

0%

-4%-3%S Korea5%4% 3% 6%2%

1% 1%
-1% 0%

India-3%-3% -8%-1%-2%-1%-2%-4% -6%-13% -13%

-14%

-17%

-29%
3%

Global trade
Tracked as y-o-ychange in aggregatedmerchandise trade2-3%-2% -8%-4%-5% -8%-1%-12% -14%

-6%
-10%
-20%

-1%
-1%

-4%
-11%3

-3%
-6%
-7%

3%
-1%

-1%

-6%

-17%
-31%

Jan’20 vs Jan'19

Feb’20 vs Feb'19

Mar’20 vs Mar'19

1. Industrial production is a measure of output of industrial sector which includes manufacturing, mining & utilities; 2. Merchandise trade is trade of SITC revision 3 commodities and is taken as the sum of exports& imports
31
Source: World bank, WTO, BCG

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

As of 31 March 2020

All sectors with positive momentum; semiconductors and pharmaback on pre-crisis TSR-level globally

ECONOMIC &BUSINESS IMPACT

As of 05 June 2020

Order based on TSR & net debt/enterprise value1
21 Feb 2020
- 20 Mar 2020

Healthier sectors

Pressured sectors

Vulnerable sectors

Semiconductors
PharmaTech Hardware
Household Products
Food/staples Retail
Health Equipment
Materials
SoftwareRetailing
Prof. Services
Auto
Financials
Food & Beverage
Capital Goods
Transport
TelecomMedia
Durable Goods
Utilities
Insurance
Real Estate
Banks
Hospitality
Energy

-30%
-20%
-26%
-16%
-10%
-31%
-32%
-30%
-40%
-30%
-41%
-35%
-23%
-35%
-34%
-17%
-36%
-39%
-30%
-39%
-39%
-39%
-44%
-52%

21 Feb 2020
- 05 June 2020
3%
0%
-1%
-3%
-3%
-4%
-5%
-5%
-5%
-6%
-7%
-8%
-8%
-8%
-9%
-9%
-9%
-12%
-12%
-17%
-19%
-19%
-20%
-21%

Companies with probability of default >15%3
22 May 2020
- 05 June 2020

21 Feb 2020
0%
0%
0%
0%
0%
0%
4%
9%
0%
0%
0%
0%
0%
2%
0%
0%
0%
0%
0%
0%
0%
0%
7%
0%

Note: As of 05 June 2020; Based on top S&P Global 1200 companies; Sectors are based on GICS definitions; 1. From latest available balance sheet 2. Performance is tracked fortwo periods, first from 21 February 2020 (before international acceleration of outbreak) to 20 March 2020 (trough of the market) and from 21 February 2020 through 05 June 2020
based on median; 3. Implied by 5-year Credit Default Swap based on median Source: S&P Capital IQ; BCG ValueScience® Center; BCG

05 June 2020

22 May 2020
- 05 June 2020

0%
0%
0%
0%
0%
0%
9%
8%
29%
0%
10%
0%
0%
4%
36%
8%
0%
5%
0%
0%
17%
4%
29%
21%

Pos. trend >= 2%
No sig. change
Neg. trend >= 2%

32

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

TSR performance2

Additional perspectives on COVID-19
Selected publications

Edition #8

Edition #7

Edition #6

Leadership & People

Supply chain

Supply Chain

Galvanizing nations forthe new reality

Sensing Consumer
Behavior & seizing
Demand Shifts

Restructuring Costs, andmanaging Cash andLiquidity

How to Lead in a Time of
CrisisThe new reality for Chief
Supply Chain Officers

Building the Bionic Supply
Chain

Edition #5

Edition #4

Edition #3

Operations

Operations

Automotive

Revamping
Organizations for the
New Reality

Accelerating Digital &Technology
Transformation

Emerging stronger fromthe Crisis

Redefining Customer
Service for the Future

Restarting Work Safely
and Under Control

COVID-19’s Impact on
the Automotive Industry

Edition #2

Edition #1

Technology

RetailHealth Care

Preparing for the restart

Facts, scenarios, andactions for leaders

Is Your Technology
Ready for the New Digital
Reality?

The $2.5 Trillion
Opportunity for Grocers
That Are First to the Future

The Timelines and
Implications for COVID19 Vaccines

Source: BCG, HBR

33

Copyright © 2020 by Boston Consulting Group. All rights reserved. Updated 9 June 2020 Version 9.1.

COVID-19 BCG Perspectives

Disclaimer

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The services and materials provided by Boston Consulting Group (BCG) are subject to BCG's Standard Terms(a copy of which is available upon request) or such other agreement as may have been previously executed by BCG.
BCG does not provide legal, accounting, or tax advice. The Client is responsible for obtaining independent advice concerningthese matters. This advice may affect the guidance given by BCG. Further, BCG has made no undertaking
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