The Impact of Coronavirus on Supply Chains

*Please note with the evolving situation, some of this information might be outdated at the time of publication

In February, we published the news that the outbreak of Coronavirus (COVID-19) had prompted the Chinese government to enact new regulations to prevent the spread of the disease. Many provincial governments announced an extension of Lunar New Year holidays and some airline carriers temporarily ceased import and export operations to and from China. Despite Coronavirus causing spikes in supply and China being home to one of SILA’s major freight partners, our supply chains are still as robust as ever, largely due to the nature of the goods we carry, but also due to our steadfast systems and technology that provides us with complete visibility of our freight. Not to mention, China operations are coming back to life with the re-opening and restarting of factory manufacturing, and it’s expected to be nearing full production by the end of the month.

However, many other supply chains aren’t so lucky, so we’re taking a look at some of the most prominent effects of the virus on the Australian logistics industry.

The Panic
At the beginning of 2020, most people thought that Coronavirus was a simple cold taking over China due to poor medical care and resources. Flash forward to now and travellers are being sent into isolation, hand sanitiser has spiked 428% in sales and toilet paper is a hot commodity. Despite the panicked photos of empty shelves and overflowing trolleys telling a story of a crumbling supply chain, the Australian Food and Grocery Council reassures us that this only reflects a short-term stock issue that they are fully prepared for. The panic-buying has called for limitations to be imposed on toilet paper, hand sanitisers and some food staples including pasta, rice, mincemeat and flour. However, this is to combat the short term panic with the supermarkets noting there is still plenty of food and there is no chance that we would run out.

With Australia’s history of natural disasters including floods, cyclones and bushfires, the likes of Coles and Woolworths have faced these massive, sudden demands from consumers before. Right now, supply chains are under more pressure and stress than they are used to; however, this is a short-term response to a sudden spike in demand as people not only begin to panic but also buy into the idea of ‘maybe I should be doing that too.’ It’s prompted Woolworths to suspend online orders in response to the panic, and shorten opening hours to allow for restocking. There are permanent plans that are in place to comprehensively respond across all networks and contingencies including resourcing and product sourcing. Though the demand is higher, it has yet to reach a level that is untenable for our trusted Australian supply chains.

The Closures
There is an undeniable reliance on Asian supply chains for tech companies who are notoriously dependent upon their manufacturing factories. Many Chinese factories had only just started opening after having their Lunar New Year holidays when they were closed again in early February.

The impact is evident through Apple’s delay of the release of the new iPad Pro as they struggle to combat the temporary closing of Foxconn and Pegatron factories which manufacture and assemble Apple devices. Apple went on to make the unprecedented announcement on March 15 that it would be closing all stores outside of China for two weeks. Even with these closures though, CEO Tim Cook notes that there is some optimism given the number of Chinese cases is going down every day.

Fortunately, the factories are opening up again, supplying relief for supply chains, but there are still expected to be more delays as over half of these workers are unable to come in. The re-openings have managed to jumpstart the supply chains as, despite the manufacturers working with 50-60%, they are still able to continue providing and re-invigorate supply chains.

The Ban
The implementation of travel bans in Australia are disrupting some of the biggest supply chains – education and tourism. With airlines cancelling all international flights, they face a massive loss of profit, a surge in employees on leave, and an inevitable freeze on recruitment. Subsequently, tourism and education are being hit with dwindling reservation and enrolment numbers for the next 6 months. International education was a $34 billion sector for Australia in 2018-19, and Chinese students brought in an estimated $12.1 billion that year. Universities are trying to maintain their enrolments and keep their current students as safe as possible by making crucial shifts to providing lectures and tutorials online. However, tourist spots are struggling as many are being forced to close. Combine this with most Australian states now in lockdown and non-essential businesses closed.

Even the most substantial and intricate supply chains are experiencing the consequences of the spread of Coronavirus, and there may be another wave of disruption to come. This crisis highlights the importance of each component in the chain and the run-on effects they have. We are fortunately prepared for any issues that may arise as a result of the virus and are grateful to have our strong network connectivity and SV3 system to ensure that our clients are still getting the best-uninterrupted service.

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