WATCH: Alex Niemeyer Examines The Supply Chain in the Era of COVID-19

April 02, 2020

Amid economic uncertainty caused by a worldwide health threat, a global supply chain system may seem among the areas most likely to face a downturn, but Miami Herbert Professor Alex Niemeyer eases fears with an encouraging outlook. The supply chain expert offers welcome positivity on the largescale supply and demand dynamics despite current stressors.

Why the shortages?
Shortages can be attributed to the extremely sudden and unexpected surges in demand for certain items, like toilet paper and hand sanitizer, not to failures in supply chain. Demand remains fundamentally unchanged, even while consumers stock up for a time, since purchasing levels should normalize in the coming weeks. Factories and transportation continue to operate soundly and no area of the supply chain is structurally broken.

What is the midterm outlook?
While the future under a pandemic remains uncertain, the midterm outlook seems positive when considering that the flow of goods, even in the most affected areas, has not undergone significant restrictions. Most industries will still be able to obtain their raw materials and maintain production. Slight shortages may occur as workers and drivers may need to care for their children or parents, but the potential decrease in manpower may be offset by some decrease in transportation.

What about the harder hit industries?
Masks, critical during the crisis, take some time to produce due to limited manufacturing capacity. Likewise, industries for medical supplies and equipment, particularly ventilators and intensive care equipment, face severe manufacturing challenges. Though steps have been taken to increase production, these industries will likely continue to face intense shortages, not due to supply chain, but to the exponential demand.

Some good news?
Timing of the outbreak during the Chinese New Year spared the global supply chain greater disruption. China normally slows down production during this time and industry players in the United States and other countries stock up in advance. With China now managing the health risk, the heavy flow of goods from the country should not be severely affected.

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