Newswise — With China being a major supplier of goods to countries around the world, there will likely be short-term, but intense, disruptions to the global supply chain, says Virginia Tech expert Barbara Hoopes.
“While short-term consequences of the coronavirus outbreak are unavoidable, long-term consequences are still hard to predict. It is clear that the impact of interrupted shipments, reduced worker availability due to quarantined cities, and the removal of international workers from the region will undoubtedly be felt worldwide. Obviously, the longer the situation continues, the deeper the impact will be felt,” says Hoopes.
“Restaurants and similar facilities are clearly uncontrolled public spaces, so the business response to shut down or control access to protect both patrons and employees is understandable,” says Hoopes. “Clearly, there are no screening mechanisms used for people entering McDonalds, Starbucks, or even Disneyland – all corporations that have chosen such measures. This means that both production and service businesses will suffer economic consequences.”
Hoopes explains that “manufacturing companies traditionally use lean inventories at facilities worldwide, causing work stoppages in China to have a relatively immediate impact on partner supply chain facilities in other parts of the world. Even seemingly minor parts can cause assembly lines to shut down if shipments are delayed or cancelled.”
In addition, Hoopes says that “not all parts are transported by ship – the cancellation of commercial flights will affect the transport of smaller components that are shipped by air, such as electronics. Finding alternate sources of supply is an obvious answer, but this is not easy to do in the short-term. The outbreak may have companies rethinking their single-sourcing strategies in the long run.”
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.
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