Coronavirus continues to impact the world, stunting supply chains and the global economy. The impact has been far reaching, and at Logistics Viewpoints, we have documented many areas of concern, including the impact on manufacturing supply chains in Southeast Asia, the automotive and pharmaceutical supply chains, the high-tech supply chain, and the impact on retail. Steve Banker has also recently highlighted 20 things to keep in mind as we make contingency plans for the impact of coronavirus.
Coronavirus and Retail
The retail industry has certainly seen its share of uncertainty with the coronavirus outbreak as well. While manufacturing operations in China slowly rebound, for many retailers it may be too late. Even for large retailers, the impact goes well beyond the short-term supply chain disruptions that the closures have caused. According to multiple reports, losses for US retailers could amount to over $700 million due to production and transportation shortages. Looking ahead, there is already concern that the coronavirus could impact retailers’ two busiest seasons: back-to-school and the holiday season. If the disruptions continue, both of these seasons could face severe product shortages. And while the impact of coronavirus is generally looked at from a global standpoint, it is worth looking at the impact from a local level as well.
Late last week, Massachusetts Governor Charlie Baker, like many other state leaders, issued a set of unprecedented mandates aimed at flattening the curve. Namely, all public and private schools are closed for a minimum of three weeks, gatherings of over 25 people have been prohibited, and restaurants and bars can only be open for take-out or delivery service. These steps have been implemented by a number of other states including California, Colorado, Connecticut, Illinois, Indiana, Kentucky, Maryland, Michigan, Minnesota, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington. Seven counties in Northern California have implemented shelter in place orders, taking social distancing to a new level.
As the trends show, the coronavirus outbreak is impacting daily life for nearly everyone, and the supply chain is at the heart of it. The first thing people think about is empty store shelves. As recommendations came in to practice social distancing and the news of school closures began to pop up, people rushed to local stores to stock up on the essentials. One of the biggest items people have been buying in bulk is toilet paper. Unfortunately, misinformation spread rapidly throughout social media that the raw materials for toilet paper and face masks were the same and that manufacturers would be focusing on face masks, which in turn, would create a shortage of toilet paper. This is all that it took for people to begin stocking up on two-ply, despite the best efforts of toilet paper makers to communicate that there is not a shortage.
My wife went to Whole Foods earlier this week to pick up some last-minute items for us, and the line for check-out was about 30-deep. She was told this was partially due to the fact that Whole Foods had toilet paper in stock. Many stores are now placing limits on the number of items consumers can buy to help make sure that everyone has access to essential products. The supply chain will continue to be interrupted, but manufacturers are doing everything they can to make sure that these items continue to be shipped and end up on store shelves.
Coronavirus and Deliveries
Amazon finally has toilet paper back in stock, but I can only imagine it will not remain in stock for very long. And while grocery stores are seeing large crowds of people every day, other brick and mortar stores are not fairing as well. The coronavirus has consumers buying online, rather than risking a trip to the store. This is true for every-day essentials as well as for meal deliveries. How much of an impact is it having? Amazon has said that it is looking to hire an additional 100,000 people across the US to keep up with a crush of orders. The company is also offering a temporary raise of $2 an hour through the end of April for hourly employees who work at its warehouses, delivery centers, and Whole Foods grocery stores.
Aside from Amazon deliveries, other delivery businesses are seeing an uptick due to coronavirus. As I noted in last week’s news round-up, Instacart launched a new service that will leave groceries on your doorstep at a designated time rather than being hand-delivered. The company has seen its sales increase ten-fold in the last weeks, as people look to get groceries and hand sanitizer delivered.
As noted above, eat-in dining has been suspended at restaurants and bars across the country. This makes home-delivery an enticing option for those people that do not want to cook or are crunched for time. Grubhub, the food delivery platform, is another company that will likely see a boost in their business. But in times of trouble, it is good to see companies making decisions for the greater good. In a statement released Friday, Grubhub announced it will suspend commission fees for independent restaurants of up to $100 million. The eateries make up a majority of the company’s restaurant network and are responsible for more than 80 percent of its orders. Generally, the commission fees can be as high as 30 percent. This will be beneficial for the restaurants, as business is sure to suffer. However, without paying these fees, it enables the restaurants to continue to make deliveries with better margins and keeps Grubhub drivers with a source of income.
For many people, however, there is still concern about having other people prepare and handle the food they are going to eat. One way to continue to support local restaurants and alleviate this concern is to purchase gift cards instead. In my town, this has become a growing trend.
Coronavirus continues to spread, and it is likely that more government restrictions are coming to help flatten the curve. Grocery stores and other retailers that offer life essentials will continue to operate, but even these could see reduced hours. The supply chain will continue to see a negative impact as manufacturing and transportation continue to see potential shortages. However, with the continued growth of online commerce, more consumers should be able to find the items they need, even if they have to wait a little longer to get them. No one knows how things will shake out or how long social distancing guidelines will be in place. But supply chains are resilient and will continue to evolve to meet the growing needs of consumers.