- Sales of smartwatches, computer monitors and televisions from manufacturers to retailers are expected to fall by millions of units in the first quarter of 2020 due to the COVID-19 outbreak, according to a revised forecast from TrendForce, a market research company.
- The sale of automobiles is also expected to fall by more than 8% due to supply and demand disruption from the outbreak, according to the forecast.
- "Potential unavailability of materials remains the greatest risk factor directly impacting the auto industry," TrendForce wrote in its report. "Although automakers can compensate for material shortage through overseas factories, the process of capacity expansion and shipping of goods is still expected to create gaps in the overall manufacturing process."
TradeForce revises Q1 forecast (units in millions)
|Previous Forecast||Revised Forecast||% Change|
|Video game consoles||6.9||6.2||-10.1%|
SOURCE: TradeForce. Smartphone forecast is units produced, automobile forecast is units sold, others are sell-in shipments.
Companies and industries with shorter supply chains will be impacted the most by COVID-19, according to Joshua Nelson, a principal in the strategy and business transformation practice at The Hackett Group.
Short supply chains mean companies have less raw material or parts on hand, "so if there's any type of disruption, they're going to feel the impact first," Nelson said.
Larger firms, like automotive or computer manufacturers, are more likely to have supply chain risk management teams that identified points of failure in a supply chain, Nelson said in an interview with Supply Chain Dive.
"What this supply risk department is doing is really looking definitely through the first-tier suppliers, but also often the second- and third-tier suppliers, to find out if there is any single points of failure where you can trace back your entire supply chain to one plant or one region of the world," he said.
Companies are at risk of disruption should take the following steps, according to Nelson:
- Look at the supply of what is in transit
- Look at the levels of safety stock
- Set up meetings with suppliers to get products prioritized
The economy has changed significantly since the SARS outbreak in 2003, with China accounting for a larger share of global trade than it did 17 years ago. But there are some similarities — in terms of the industries impacted —between today's COVID-19 outbreak and 2011's Fukushima nuclear disaster, Nelson said.
The Fukushima disaster resulting in the evacuation of a plant that was the sole supplier of a pigment used by multiple automakers in the production process. It resulted in General Motors temporarily pausing production at its North American facilities.
GM considered the Fukushima disaster a wakeup call and supply chain risk management became a much more important consideration for the company's leadership and investment decisions, according to Forbes.
The industries affected by Fukushima, like auto parts manufacturers and industrial specialties, are the same ones The Hackett Group identified as high risk in the recent coronavirus outbreak, Nelson said.
How much of an impact coronavirus has, though, will depend on how well it is contained.
"If the quarantines and the closures continue, this is where you're going to be eating into your existing inventories," Nelson said. "So if it continues to be quarantined and closed down for another month, things are going to get worse, we're going to have supply chain shortages."
The Federal Reserve said the coronavirus had already "weighed negatively on investor sentiment," according to the minutes from its January meeting released this week.
"[E]arly GDP releases showed a pickup in growth in China and some other Asian economies, though news of the coronavirus outbreak raised questions about the sustainability of that pickup," the minutes read.
The World Trade Organization's most recent Goods Trade Barometer reading said year-over-year trade growth will likely fall in the first quarter of 2020. However, its forecast "does not account for recent developments such as the outbreak of COVID-19, the new coronavirus disease, which may dampen trade prospects further," the organization pointed out.