Coronavirus: shortages may be on the way
With financial markets in turmoil, Dr Jonathan Owens, logistics expert from the University of Salford Business School, looks at why the coronavirus is having such a huge impact on business and what can be done to mitigate the risks.
Dr Owens said: “The spread of the Coronavirus to the west means there is a much greater chance of noticeable disruptions in the global supply chain network. Most supply chains continually have disruptions of sorts and these are sometimes factored into their planning, and they survive.
“However, in this instance given that mostly the flow of our manufactured goods is East to West, and although slowly Chinese manufacturing companies are returning, much of the country is still on quarantine lockdown, and after a full production shutdown it will take a while to get up to previous working capacity.
“Also, it is difficult to raise production to the full level when only 50 to 80 per cent of workers are present due to the earlier mass migration because of the Chinese New Year and are unable to return due to China lockdown. With a reduced workforce there are now additional operational sterilising phases to be added for the manufacturers before they ship goods, and these needed to be set up quickly.
“Then, because of the numerous quarantine checkpoints installed regionally, we are seeing a stockpile of empty shipping containers that are not able to get from the ports and load up. Subsequently, the normally balanced flow of shipping containers within the supply chain has been seriously disrupted. As such, we have read reports about vital components such as key fobs being shipped out of China in suitcases.
“We are seeing no big breaks in the supply chains yet, but what is arriving at our ports now may have been ordered five to six weeks ago. So, if we do see shortages this will be in the coming weeks. Looking to alternative sourcing is not the immediate answer, as this is more a medium to long term solution. In addition, it is not clear how long it would take to get an alternative source in place and operating efficiently within the existing supply chain. Also, due to the spread of the Coronavirus, we may find ourselves in a similar situation with this source.”