Outbreak Takes Its Toll On Promo Industry
The outbreak of coronavirus, Covid-19, continues to upend daily life for tens of millions of people in China as well as transportation, manufacturing and supply chains throughout the world.
Huwei province—the epicenter of the outbreak, Wuhan, is the province’s capital—has changed the way it’s tabulating the cases, jumping the number of people reportedly infected with the disease by almost 15,000, along with the death toll. The number of infected people in Huwei now stands at 48,206—the total number of cases in China is 59,805, and 1,367 have died—and all nonessential workers in the province have also been told to stay home until February 21.
While quarantines, screening and other procedures are in the place in China and elsewhere, the coronavirus may be an issue for a while to come. Speaking to The Harvard Gazette, Marc Lipsitch, professor of epidemiology at the Harvard T.H. Chan School of Public Health and head of the School’s Center for Communicable Disease Dynamics, says that it’s a matter of time before the disease arrives in the U.S. in larger numbers and notes that the lack of containment won’t be a failing of the country’s government or systems, but that no one, anywhere, has a playbook in place for dealing with it. He says, “I think we should be prepared for the equivalent of a very, very bad flu season, or maybe the worst-ever flu season in modern times, since we’ve had ventilators and been able to provide intensive respiratory support.”
The supply chain for practically every industry extends through China and they, like promotional products, are having to accommodate the virus’s impact on their employees’ wellbeing, manufacturing and shipping of goods, and maintaining local inventories. Joshua White, senior vice president of strategic partnerships at distributor BAMKO, has published a whitepaper on the coronavirus and its impact on global supply chains. In the paper, he notes, “Coronavirus has already infected more people than the deadly eight-month-long SARS outbreak of 2002 and 2003. ... At the time of the SARS outbreak, China represented about five percent of the global economy. Today, China accounts for about 18 percent of the global economy. China is much more important to global trade today, and a massive disruption in China is likely to have a much bigger downstream effect on the rest of the world.”
Delays and disruption to manufacturing and logistics are an absolute certainty at this point, White points out. What remains in question is the extent of the disruption. Travel restrictions limit workers’ ability to return to their jobs following the government-extended Chinese New Year holiday, and those in quarantined areas may be there even longer. White writes, “We expect factories in certain areas to remain closed for extended periods of time. More impactful will be the second-order effects of upstream component manufacturers and raw materials suppliers being impacted in ways that are disruptive to factories that would otherwise be largely unaffected. The complex and interconnected nature of modern supply chains means that manufacturers entirely outside of China could also directly feel the impact.”
Transportation roadblocks are also expected to disrupt business. As the whitepaper notes, people and freedom of movement are necessary for transporting raw materials and parts, sending products to testing labs and conducting factory audits, and all of these are expected to be delayed for at least the next several months.
White writes, “Compounding all of the above will be the bottlenecks that result. Companies will be trying to make up for delays and decreased production capacity by increasing demand for the limited production and shipping space that will be available. This will result in bottlenecks for both that will slow things down even further.”
Promotional products industry companies are working to prepare for coronavirus-related business disruptions, despite the levels of unknowns in the situation.
“The virus has definitely affected our world,” says Memo Kahan, president and owner of distributor PromoShop. “We have pending projects, in-production projects and needed projects; all unfortunately with lots of unknowns and challenges. We have changed items and are speaking with domestic partners for stock and different options. This will become a larger challenge if we’re not able to manufacture or import products.”
Jason Lucash, senior vice president of marketing at supplier HPG, says, “We ramped up inventory levels in advance of the annual Chinese New Year shutdown, and we don’t expect any delays as long as the coronavirus situation improves over the next month. We are closely working with our suppliers to get updates on the state of the factory openings and employee/staff well-being.”
Coronavirus-related interruptions have also been reported by distributor Image Source. Company President Tom Goos, MAS, says, “We’re working with suppliers on several custom projects they’re producing for us in China and we’re hearing delays on those. We’re hoping the delays are minor but it’s mostly an unknown for them as well. Everyone seems optimistic but are proceeding with caution. Domestically, the suppliers we speak with feel that they have an adequate supply.”
Industry companies are also working with their clients and partners to manage delays or other issues stemming from the outbreak. Kahan says, “Communication is key here. We first have to educate ourselves on the situation and then share what we have learned with our teams and clients alike. We’ve been speaking with our customers as the situation is so fluid, trying to offer alternative solutions with any bad news, all while providing white-glove treatment.”
Goos adds, “With the coronavirus, I haven’t heard a lot of media coverage on disruption of goods or how consumers’ buying will be affected. I’ve been updating my team weekly or twice a week on the situation, and while we haven’t put out a lot of broad client education on the issue, we’ve had some conversations regarding larger orders.”
Not lost on any of them, however, is the human toll of the disease. “Many people are just looking at the coronavirus here in the U.S. from an economic perspective, most importantly the human element is what we are focusing on,” says Lucash. “Yes, it might put out our inbound inventory receipts and new product launches, and might cost us more money to air freight in product to meet demand. However, we are addressing and realizing with our factories that this relates to more than business. The stress and emotional effects on people’s lives and families are far more important than the business side. All over the world families have been separated, lives have been lost and the future is uncertain. As an industry together, let’s not forget about that side of the story as that’s far more important than delayed orders.”