The Long Term Impact of COVID-19 on the Supply Chain Management System

By September 16, 2020 News
CHI Blog

The Long Term Impact of COVID-19 on the Supply Chain Management System

Everyone worldwide has felt the effects of the COVID-19 coronavirus pandemic, from the cancellation of social events to the closing down of many businesses, sometimes permanently. The economy especially feels the strain, as companies are forced to change their workflows to accommodate social distancing measures.

However, supply chain managers truly understand the impact. COVID-19 has significantly changed consumer transactions and exposed problems in current supply chains. We can expect inventory shortages, shipping delays, and manufacturing issues for many months.

It’s not just your inability to buy cleaning products and toilet paper. Businesses of all industries, from Toronto restaurants to hospitality, have to deal with these new issues. But what exactly are the long-term consequences and what can we expect in the coming months?

Household Goods on Hold

When initial reports of a potential home quarantine reached the public, many families attempted to freshen up their living spaces in preparation. They bought furniture, fitness equipment, packaged foods, cleaning supplies, and other household items.

The resulting unorthodox demand caused significant problems, including unreliable delivery dates and shortages. As reported by the Wall Street Journal, these items were out of stock for many months.

Delay of Seasonal Stock

Seasonal items, such as Christmas decorations and summer swimwear, are only in demand during certain parts of the year. Retailers usually order these items in advance by several months.

However, the pandemic in China halted production in many factories. These goods could not reach overseas in time as a result, and some manufacturing stopped entirely. Consumers now might not find the products they need for events like “back to school” or Halloween.

Low Supply of Packaging

The problem sometimes isn’t the lack of the product itself but rather the packaging for it. Soap and hand sanitizers, for instance, cannot be shipped to customers because the dispensers are in shortage. These products specifically are essential at fighting the virus, and their shortage has effects that extend beyond the supply chain.

The packaging industry in general is about to see some changes according to some sources. More companies operating in this sector are looking to source their materials in places other than China, and the materials they do choose will likely be different in the near future.

Fewer Product Lines

Many manufacturers are attempting to remedy current supply chain woes by cutting their number of SKUs (stock keeping units). SKUs are essentially product identifiers that point to a company’s specific items.

By removing certain items from the chain, they can meet the demand of other highly-needed product lines. For instance, companies have increased the production of essential cleaning products by reducing SKUs during spikes of demand.

Chief Supply Chain Officer Marc Engel of the consumer goods firm Unilever commented in an interview during the Reuters Transform Europe virtual conference that “a much simpler portfolio was required in order to make sure that we keep ourselves running.”

Higher Shipping Rates

Manufacturers and retailers aren’t the only companies making changes to accommodate supply chain delays. Third-party logistics and shipping companies like FedEx have limited free shipping options for online shopping among other actions.

This practice is common during months of high demand, such as the Christmas rush. Adding surcharges to shipping rates helps deal with higher volumes of orders. During the pandemic, consumers became more likely to purchase large items or expensive electronics online, putting a strain on shipping services.

As companies like FedEx struggle to profit from business-to-consumer parcel transportation, surcharges will become “the new norm,” especially during COVID-19.

Get the Help You Need From CHI Real Estate

Despite all these production and supply chain setbacks, the real estate market is still staying strong. In fact, listings are still coming off the shelves during the pandemic.

If you’re in need of a Professional Restaurant Broker in the Toronto area, get in touch with CHI Real Estate. Our teams have the expertise to help you explore opportunities and find the perfect lease. Connect yourself with the right resources to navigate the complex real estate market in Toronto.

Our advisors have worked with companies everywhere, including restaurants, franchises, and commercial buildings. CHI is the right choice for any Toronto real estate endeavor. Get in touch with the team at CHI Real Estate by calling 647-347-9723.

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