Updates and Information on Coronavirus (COVID-19)

Coronavirus: Disruptions of Supply Chains and the Impact on Consumers

February 28, 2020

Many businesses are warning the public of potential shortages of products due to the spread of the Coronavirus and its effect on global supply chains. How severe are the impacts really likely to be for United States consumers? Paul Dittmann, assistant department head of Supply Chain Management at the University of Tennessee, Knoxville’s Haslam College of Business, and an expert on the global supply chain, discusses the situation:

We’ve seen articles about the impact of supply chain disruptions on everything from pharmaceuticals to automakers to tech companies and now consumer products like Coca-Cola. But Americans haven’t really felt the impact of these disruptions on their day-to-day lives. When will we start to experience the effects in a meaningful way as American consumers? 

Dittmann: Unless this gets a lot more severe, we suspect the shortage of goods will be minimal, as will the impact felt by consumers. This is because, for example, some companies have inventory to carry them for a short time, if a key supplier has to shut down for a period of time due to the virus. They may also have alternate sources of supply in other areas not impacted.

What products/consumer goods will be derailed the most by supply chain disruptions, keeping in mind we’re thinking about direct impact to consumers? 

Dittmann: Global companies have a lot of very talented and creative people. Most will find innovative solutions to avoid serious shortages for any extended period of time. Having said that, companies with global supply chains heavily dependent on Asian countries like South Korea and China may be unable to supply certain products and consumer goods. Some companies will see minimal, if any disruption, and for some it will be significant.

When/if we experience a shortage of inventory, how will prices be affected? 

Dittmann: Prices may go up a bit, but most companies affected will have competitors that are not impacted. The ability to raise prices will be limited due to global competition.

News outlets and the Department of Homeland Security (as recently as yesterday) are telling American consumers to prepare by stocking up on items like non-perishable foods, bottled water, prescription medications, OTC cold and flu remedies, baby products and more. How have supply chains prepared for something like this (or not)?

Dittmann: These kinds of irrational panics create unexpected demand spikes, which do seriously disrupt supply chains. Because of the artificial surge in demand, there may be a temporary shortage of certain consumer goods – say canned foods, boxed foods, these sorts of things – until the supply chain catches up. Otherwise, global competition and individual creativity will find ways to respond quickly.

Additionally, an interesting facet of this Coronavirus outbreak is alluded to in the news story you referenced above: Because of the trade war between the U.S. and China, several American companies with supply chains in China have stocked up on goods in preparation for potential tariffs and also for the Chinese New Year. So their inventories may not be affected at all in the short term by supply chain interruptions.

When the outbreak is contained or stabilized, how long might it take before supply chains normalize and supply returns to former (or the new normal) levels? 

Dittmann: Supply chains will return to normal very quickly once the panic subsides.

CONTACT:

 Scott McNutt, business writer/publicist (865-974-3589, rmcnutt4@utk.edu)