The spread of the coronavirus has been a wake-up call for many companies worldwide and a test for supply chain resilience, says Virginia Tech expert Barbara Hoopes.
“The more widespread the viral impact, the more uncertainty there will continue to be for multinational companies. Companies that rely on a narrow geographical area for production of goods are understandably considering strategic changes such as alternate sources of supply and building up higher inventory levels to guard against future stock-outs,” says Hoopes.
Hoopes predicts the tech sector will be the first to be affected. “The cancellation of commercial flights will impact smaller, higher-margin goods such as electronics as these types of products are commonly flown as cargo on passenger flights.”
“Smart watches, phones, video game consoles, computers, and embedded electronic components in larger goods may see the earliest impact. These physically smaller, but higher-value goods are often handled on a just-in-time inventory basis due to shorter transit times. These are the components that will likely be missed first in both retail and production assembly operations in the U.S.”
“Due to the geographic distance from the epicenter of this crisis, consumers should expect that noticeable disruptions to the supply chain will hit the U.S. later than breaking news might indicate. For example, tangible delays and disruptions may affect shipments of Halloween or Christmas merchandise,” says Hoopes.
Hoopes emphasizes that impacts won’t be limited to manufacturing-based businesses.
“Hospitality and service businesses such as hotels and restaurants are not likely to make up sales like manufacturers as the economy rights itself. Goods-based companies can use inventory to absorb the impact of the disruption, and most consumer products will likely bounce back by adjustments made in production levels as the year progresses, but services are perishable – lost seats on flights, restaurant meals, and hotel stays will likely just stay lost.”
Hoopes says the slowdown will undoubtedly have secondary effects. “When people and goods don’t move, the demand for fuel is clearly impacted by cancelled flights, quarantined population centers, and maritime shipping delays. This reduced demand can clearly affect commodities markets and prices.”
About Hoopes
Barbara Hoopes is the academic director of Virginia Tech MBA Programs and associate professor of Business Information Technology. She teaches for the Virginia Tech MBA programs in the greater Washington, D.C., metro region in the areas of operations management, global supply chain management, and business analytics. She has led supply-chain-focused study abroad trips with groups of MBA students since 2003.
Interview
To secure an interview with Hoopes, contact Shannon Andrea in the media relations office at sandrea@vt.edu or 703-399-9494.
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