There’s no doubt you’ve heard plenty about how coronavirus is affecting the world. At this point, you’re well aware of its effect on global health, but you may not know how it’s impacting other parts of life as well. COVID-19 is more than a public health issue.
The coronavirus outbreak is harming the economy as well as people’s physical health. Businesses are closing down to minimize the spread of the virus, and many people who would otherwise work now must stay at home. However, some of the most significant disruptions are happening along the supply chain.
Stores around the world are experiencing shortages due to breaks in the supply chain. These shortages lead to problems as small as not being able to buy hand sanitizer to as severe as a dwindling supply of medicine. There are two primary sources behind these deficits: supply loss from quarantined areas and a sharp uptake in demand elsewhere.
Sourcing From Quarantined Areas
One of the driving factors behind the coronavirus’s disruptive force is where it started. The outbreak began in China, the nation with the largest manufacturing output in the world. You’ve seen enough “made in China” stickers to know the impact this could have on American industry.
Many companies outsource their manufacturing to China. Since this country was hit first and hardest, its production has slowed significantly. Due to factors like workers having to stay home, many Chinese factories have had to limit or pause their operations.
On top of these manufacturing difficulties, concerns over the disease are also hindering supply chain operations from China. Some companies are now hesitant to receive anything from the area because of coronavirus-related worries. They either cut off their supply entirely or inspect it before moving it along the logistics chain.
Even if facilities can work at full capacity, contagion concerns lead to piles of dead merchandise sitting on warehouse floors. This unused stock may not have a long shelf life. If that’s the case, plenty of otherwise valuable products will go to waste.
Rapidly Increasing Demand
A supply shortage isn’t the only thing facing logistics in the middle of this epidemic. Widespread fears of COVID-19 have led to a rapidly increasing demand for some commodities, even in areas with fewer cases. You can see evidence of this just by going into your local department store and checking the toilet paper shelves.
People everywhere are worried about the coronavirus. Hearing the advice that it can help to self-quarantine, many people rush to stores to stockpile essentials so they can stay indoors. This skyrocketing demand for things like soap, hand sanitizer and toilet paper leaves the supply chain fumbling to catch up.
Changing demand is something businesses are well-acquainted with but in different contexts. Most customer patterns follow seasonal trends, so companies can track and predict them to prepare for oncoming changes. However, this demand came seemingly out of nowhere, so businesses couldn’t predict it.
It doesn’t help that many in-demand products come from — you guessed it — China. On one end of the logistics chain, supply production has dropped, while on the other, demand has shot up. COVID-19 has created not just a global health crisis, but also a supply chain nightmare.
Preventing Future Supply Chain Disruptions
It’s difficult to predict future disease outbreaks, but businesses can take steps to be ready for them. Amid all the coronavirus panic, there are key issues you can point to and learn from to prevent future disruptions. Improving supply chain resiliency wouldn’t just protect business ventures. It could also help provide people with what they need in times of crisis.
To prevent similar supply issues, companies could work to avoid single-sourcing. In both this current crisis and the 2011 Fukushima earthquake, businesses that relied on a single company or area for products experienced disruption. If supply chains had multiple geographic sources for the same materials, localized issues wouldn’t affect them so profoundly.
Amid these shortages, the FDA has recommended increased data sharing throughout the supply chain. With improved information sharing, companies could monitor changes along the logistics process with greater accuracy. More data would also enable AI to make more reliable predictions about events like this.
The COVID-19 epidemic is a severe issue on many fronts, but it’s also an opportunity to learn. Businesses can look at what went wrong here so they can avoid a similar situation in the future.
By: Caleb Danziger, BOSS contributor