Day two for MODEX 2020 concluded with industry players addressing the now-notorious coronavirus and what this means for both domestic and international markets fortunate enough to continue operations without disruption. From what we learned during the session, “Coronavirus and Global Supply Chains” the wave currently felt in China, Italy, and beyond, will eventually make its way to the U.S. and companies have no reason not to be prepared.
Researcher Philip J. Palin, John Paxton with MHI, and David Shillingford with Resilience360 took the unsettling topic head-on and addressed concerns without hesitation. Traders be aware: for domestic and untouched international markets, the worst isn’t over. The coronavirus creates more than just health concerns. It impacts trade operations, legal concerns, and causes financial turmoil as we’ve already started to see.
“The virus is the primary cause of the supply chain impact but the secondary causes coming from the virus include financial, regulatory, compliance, and legal,” explained Shillingford. “Another risk to think about is workforce risk. How many of the workers that left for Chinese New Year have been able to come back, and for those that have returned, are they able to work with open factories or are they still under quarantine?”
“The good news is, the extraordinary supply and demand disruption we’re discussing in terms of China is being released. It’s slow but it’s happening and it’s giving us a benchmark of for how long domestic disruption will be,” Palin stated after announcing the first containership from China arrived at the Port of Los Angeles in almost 10 days on Monday.
Shillingford goes on to explain the shifting patterns in consumer behavior as well, noting that due to worldwide panic, demand is shifting and challenging the logistics sector. Buying habits have undoubtedly changed in recent weeks along with mindsets. Interactions are now limited to a fist-bump or elbow touch rather than a handshake and the numbers of public events cancelled are going up.
“Other things we are seeing involve personnel movement. It’s not just transportation impacted,” Shillingford added.
On the legal side of the crisis, Chinese suppliers are having an issue with certificates and contractual obligations. Shillingford urges industry players to understand the importance of knowing if suppliers have been issued force majeure slips.
“One thing supply chains hate is variance, and there’s going to be a lot of variance and volatility on the demand side,” he concluded.
What does all this mean for the U.S.? At the end of the day, it’s a matter of preparation and strategizing for the more fortunate markets without the disruption of a complete shut-down.
“There was a hidden, horrible problem in the Hubei province that required a draconian measure to prevent transmission of the virus. We should be ahead of that curve as well as the rest of the world, even with this very contagious virus,” explained Palin. “And even if we are behind that curve, we don’t have 300 million workers separated from their place of work.”