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Coronavirus & The Impact On Global Supply Chain

The Coronavirus continues to spread quickly, exceeding 20,000 cases and 425 deaths as of February 5, 2020. While the bulk of the outbreak remains in the epicenter of Wuhan, China, there are 159 reported cases in other countries, including the United States.

The effects of this epidemic are being felt far and wide -- from travel & tourism to e-commerce, but the dominoes are now beginning to fall across the global supply chain. Top companies like Apple, Hyundai, Ford, Starbucks, McDonalds and IKEA are reporting factory closures and major disruptions to business. Experts predict that if factory closures extend into mid-February, there will be widespread shortages to all retail industries.

 

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Apple CEO Tim Cook said on an earnings call Tuesday that Apple had been regularly deep cleaning stores this week and conducted temperature checks on employees to avoid spreading the virus. He added that while sales in a Wuhan store, one of the first to close, were relatively small, he expected the decline in retail traffic and other store closures to negatively impact sales. Sales in China make up about 15% of Apple's total revenue.

The New York Times reported today that Hyundai will suspend production in South Korea, due to disruption in parts supply. Other automotive companies announcing closures and delays this week are Ford, Nissan, Toyota and Tesla.

With a large portion of customers shipping from China, the ramifications from the outbreak could prove to impact business greatly. According to customs data from last month, Chinese imports accounted for roughly 40% of the shipments entering the U.S.

“Currently we aren't yet seeing any effect from the virus, however if the issue persists over the next few months or spreads to the rest of China we will definitely see issues,” says NEXT Sr. Manager of Drayage Operations, Jordan Gladstein.

“It’s something we’ll need to watch closely.”

Economists however, are already sounding alarm bells. FreightWaves recently interviewed economist Paul Bingham, Director of Transportation Consulting at IHS Markit about the fallout from overall transportation issues.

“The main problem would be on the land side, the truck drivers and others involved in freight handling within China, moving between cities. When you get into these quarantine situations, that’s clearly where you start to crimp the ability of the supply chain to function.

 

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Though supply chains can make do with certain stopgap measures for the time being, they cannot really circumvent the gravity of the problem in the long run.

Shehrina Kamal, Product Director of Risk Monitoring at Resilience360 spoke to FreightWaves about supply chains withstanding the onslaught of problems… for the moment.

“Just like with the trade war, businesses will be a bit cautious about taking any drastic measures for now. But if the virus outbreak is prolonged over several months, companies might start to look at alternative options.”

To find out how to best protect yourself, please visit the World Health Organization for the latest updates.

 

 

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