Mar 12, 2020 - Economy & Business

Brace for coronavirus supply shocks

Illustration: Eniola Odetunde/Axios

Products from major American companies including Apple, GM, Coca-Cola and even Facebook may soon become unavailable, as the fallout from the COVID-19 outbreak backs up and shuts down global supply chains.

Why it matters: Consumers should brace themselves for products to go missing in the coming weeks and months — and it may not be the ones they expect.

For example: Facebook is already short on Oculus VR headsets, and Apple has reportedly told support staff that replacement iPhones for some devices will be in short supply for two to four weeks, our colleague Ina Fried notes.

  • Coca-Cola warned in late February that products in artificial sweeteners used in Diet Coke have been delayed.

Other day-to-day essentials could be in short supply, too.

Procter & Gamble, which makes everything from toilet paper to laundry detergent, has more than 300 suppliers in China that provide 9,000 different materials for its products.

  • “Each of these suppliers faces their own challenges in resuming operations," Jon Moeller, P&G’s CFO. told analysts last month. "The challenges change with the hour."

Go deeper: The coronavirus hasn't upended the pharmaceutical supply yet, but the federal government is acutely aware that dozens of prescription drugs are at risk of shortage.

  • The FDA is working with 180 drug companies and 63 medical device manufacturers to evaluate whether their products and components are at risk.
  • However, it has suspended most inspections of foreign manufacturing sites through April.

The big picture: The supply shortage will likely expand significantly, experts say.

  • "As East Asia starts to recover, the focus turns to Europe and then to North America," Joe Brusuelas, chief economist at tax and consulting firm RSM, tells Axios.
  • He expects a cascade of shocks to continue, "with the worst impact for businesses to come in April and May."

Chinese supply chains may be lumbering back, but there will likely be rolling auto parts shortages in other regions of the world, mirroring the spread of the virus, throughout 2020, Andrew Chien, a partner at consulting firm Oliver Wyman, tells Axios.

  • The next risk will likely come from Korea, where most of the world’s memory chips are made. Carmakers have a few weeks’ buffer of supply, but Chien expects to see shortages within a month.
  • Other potential shortages could include components imported from Italy: Brembo brakes, Pirelli tires, and FiatChrysler engines and transmissions.

By the numbers: A survey released Wednesday by data provider ISM shows the virus outbreak has caused supply chain disruptions for nearly three-quarters of U.S. companies, and many are already pricing in revenue losses this year as a result.

What's next: Companies in multiple industries tell Axios that the situation remains fluid, with teams of people monitoring supply chain issues around the clock.

  • Shipping and delivery could become a new operational chokepoint, especially if more regions end up in lockdown like Italy.

Go deeper

Coronavirus has disrupted supply chains for nearly 75% of U.S. companies

Employees produce medical masks at Madaran Medical Manufacturing Company in Robat Karim district of Tehran, Iran. Photo: Fatemeh Bahrami/Anadolu Agency via Getty Images

The COVID-19 outbreak has caused supply chain disruptions for nearly three-quarters of U.S. companies, and many are already pricing in revenue losses this year as a result, according to a special ISM survey.

What's happening: Data show global production out of China fell to an all-time low last month, with freight and shipping slowing dramatically as the virus has shuttered factories and container ports.

The coronavirus outbreak will forever change the world economy

Illustration: Sarah Grillo/Axios

Both the U.S. and global economies are set to be permanently altered by the coronavirus outbreak and the measures that have been taken in response to it, experts say.

The state of play: "Fundamentally there are going to be huge changes in household consumption patterns, business patterns and global supply chains," Kevin Warsh, a former Fed governor and current economics lecturer at Stanford, said during a Reuters teleconference.

We're still behind on coronavirus testing

Illustration: Sarah Grillo/Axios

Coronavirus testing capacity is still lagging far enough behind demand that the U.S. continues to only test the sickest patients — a bad omen for future efforts to return to normal life.

Why it matters: Diagnostic testing is the cornerstone of any containment strategy. To even begin talking about resuming social and economic activity, we would have to get testing right first.

Go deeperArrowApr 7, 2020 - Health