Could COVID-19 be the impetus that forces many companies, or entire industries, to rethink the global supply chain model, especially their reliance on China?
A logistics expert from Butler University says the pandemic’s impact on manufacturers’ inability to obtain raw materials and supplies has sounded the alarm.
“I think this may be if you’re a prudent thinker,” says Matthew Caito, a faculty lecturer on global supply chain and analytics at the Lacy School of Business. “This would be an amazing wakeup call about your supply chain and the stability of your supply chain in outsourcing so much to China now.”
Caito says the disruption of the global supply chain and the shutting down of the U.S. economy has exposed the vulnerabilities of many organizations.
“When something like this happens, everything stops. Businesses have to stop because they just don’t know what’s going to happen,” Caito said. “Companies have to preserve their cash.”
He says the challenge going forward is how to restart the economy and how do companies restart manufacturing when there’s been such a global disruption.
“The other challenge is going to be, what’s going to happen to consumer confidence,” wonders Caito. “Forecasting is going to be exceptionally difficult. I would say for the next two to three years.”
Prior to teaching, Caito worked in operations and administration for his family’s business, a wholesale distributor of fresh produce for retail grocers.
“We really have to focus on stability and consistency, making sure we have our supply chain very consistent and it’s really been broken down right now,” says Caito.
From a consumer angle, Caito says many companies suddenly do not have a clear demand signal as the outbreak has completely changed buying behaviors and patterns.
Caito is concerned if there’s a resurgence of the virus this fall. “If there’s another situation like we’re going through right now, consumer confidence could be really damaged for a very long time.”
Caito says he’s a student of history and has been looking at newspaper coverage following the Spanish Flu pandemic of 1918, which lingered for about two years.
“For years, people were anxious about being around other people for years. I’m not saying that’s going to happen here,” explained Caito. “But it’s a consideration and one of the challenges with any supply chain is making sure that we have our forecasting down and I think all the forecasting is out the window right now because we just don’t know what’s going to happen in two weeks to three weeks to months or two years.”
Caito tells Inside INdiana Business manufacturers and retailers may rethink their ability to get raw materials and supplies.