Once news of local and state lockdowns went public, many Americans rushed to the grocery store to stock up on food and other necessities. This initial wave of consumers left shelves empty and many people without supplies for coming weeks. Now, three weeks into state lockdowns, grocery stores are still struggling to keep their shelves stocked–and it isn’t just because of frantic shoppers. Many stores rely on a foreign supply chain that is beginning to see the effects of new safety regulations and export bans.
As stricter regulations are put into effect to contain the virus, risks of disruption to the global supply chain are growing. Seaports have closed to new shipments, there aren’t enough truckers to transport goods, and air freight capacity is at an all-time low as very few planes are flying.
Along with shipping restrictions, many foreign providers are considering restricting exports due to food insecurity. Fitch Solutions put together a list of potential halted exports last month. The list includes countries that have already stopped exporting some goods:
- Vietnam began restricting exports of rice on March 25th to support food security. The country is the third largest rice exporter, accounting for 13-15% of global exports.
- Russia, the world’s largest wheat exporter, imposed a wheat export quota of 7 million tons for Q2.
- Ukraine, another strong exporter of wheat, has banned buckwheat exports.
- Kazakhstan has followed suit by banning exports of buckwheat, wheat flour, sugar, sunflower oil, and some vegetables. As one of the largest exporters of wheat flour, the ban may affect bread companies around the globe.
Japan Ditches China In Multi-Billion Dollar Coronavirus Shakeout
Japan’s decision to help company’s source elsewhere, a timely and expensive endeavor after multinational corporations that have made China their go-to manufacturing hub for decades, comes at a time when U.S. companies are leaving, too, even though there is no official push to do so.
Global Supply Chain Disruptions are Reverberating
On March 15th, The Consumer Brands Association sent a letter to the U.S. State Department and Trade Representative urging them to prepare for supply chain disruptions.
“In times of pandemics … essentials include over-the-counter medicines, cleaning and disinfecting agents, personal care products and non-perishable staples,” the letter said. “Absent early intervention, Consumer Brands fears that efforts by other countries to restrict the export of base materials, nutritional and food inputs, chemicals and other essential manufacturing supplies and ingredients will prevent manufacturers from being able to increase production, ultimately leading to consumers being unable to obtain products that are vital to treating and stopping the spread of COVID-19 and remaining healthy.”
As pressure has increased, many brands with foreign suppliers have rushed to locate domestic options to get products to consumers and businesses more quickly. Companies who rely on local suppliers are likely more prepared to respond to the situation as it unfolds.
In the case of Coronavirus, it is clear to see why a domestic supply chain is the most reasonable option in times of crisis. Although it may be pricier and more difficult in ordinary situations, it could ultimately save lives when pressure is put on the global supply chain. The Coronavirus outbreak has highlighted the resilience and adaptability in the American food industry and workforce as a whole.
Bringing Manufacturing Home
A key finding in a new survey by Thomas Net shows that over half of manufacturers are ‘likely to extremely likely’ to bring production and sourcing back to North America. Additionally, 47% of U.S manufacturers report they are now seeking domestic sources of supply.
“I have been saying this for decades. While it’s unfortunate a crisis like this is what has shined a light on our dependence on China, how people are waking up to the importance of domestic production is a good sign for the future of U.S. manufacturing,” said Don Buckner, President of MadeinAmerica.org.
The fact that the China-centered global supply chain is no longer needed (if it ever was) has recently been shown by the multinational toolmaker Stanley Black and Decker. It brought production of its Craftsman tools from China back to Fort Worth, Texas, a year ago. It reports no increase in costs and much less impact from the coronavirus than would have been the case if it had remained in China.