Article

3 considerations for businesses amid coronavirus supply disruption

RSM’s chief economist identifies three immediate considerations

Mar 10, 2020
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Economics COVID-19 Business strategy

The coronavirus (COVID-19) outbreak, which has routed financial markets and sent shocks through the global supply chain since early this year, presents considerable near-term challenges for middle market companies. RSM Chief Economist Joe Brusuelas offers the following immediate guidance to offset impediments in the trade channel:

  1. Evaluate your supply chain and determine if you can shift dependence away from China and Southeast Asia to North America: “There simply aren’t going to be enough goods,” says Brusuelas, “This is the tip of the spear of the supply shock,” he adds, noting that shipment slowdowns have affected “every single port across North America.” China exports in January and February declined 17.2%. Meanwhile, the California ports of Los Angeles and Long Beach, which account for about half of containerized goods, report business is dwindling. Cargo volume at the Port of Los Angeles fell 23% in February. In a statement on March 10, port officials said factory production in China remains at low levels due to the virus.
  2. Evaluate how you ship your goods and consider alternative modes of transportation: The port slowdowns make it critical for companies to consider alternatives, particularly for those businesses that rely on ocean shipments. “Can we send it by train? Can we send it by truck? What about air?” asks Brusuelas, noting that ports appear to be laying off dock workers.
  3. Determine if you have enough cash to weather the storm: Responding to coronavirus challenges may require an additional infusion of cash, according to Brusuelas. It’s critical for middle market companies to shore up short-term liquidity needs in the form of bridge loans, revolving credit and government assistance offered through special temporary lending facilities. “There may be sectors in which growth slows to zero,” he says.

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