The Impact of Panic Buying on the Supply Chain - Covid19

Today, the pandemic has already affected nearly 200 countries. The worst hit are the USA, Italy, and Spain. The number of cases worldwide right now stands at over 30 lakh while the number of deceased stands above 2 lakh. And these numbers are only rising every day.

At the moment, the most effective way to control the spread of the virus is to stay indoors. In other words, social distancing is the only thing we can do now.

With the pandemic rampaging around the world at will, governments are shutting down places of public gathering, such as shopping malls, gyms, theaters, disco, and even banning weddings and funerals. Countries like India, Germany, France, New Zealand, Belgium and others are under complete lockdown.

It is only natural that such a state of affairs has created panic in people. One of the manifestations of this panic is Panic Buying. Panicbuying happens when people buy large quantities of items in fear of them being unavailable in the future. Let’s talk more about that!

What is panic buying?

Panic buying is simply the tendency to stock up on essentials due to a fear of price rise or shortage. This can affect groceries, necessary items, goods, vegetables, fruits, fuel, toiletries and even alcohol!

Right now, millions around the world and in India have started to stockpile on such items. People who do this see it as a precautionary measure they are taking, something that can allegedly protect them in the near future, according to them. Panic buying happens not just in the case of real life shops, but also for online ones. For instance, people are increasingly buying groceries and medicines online. This trend has certainly put a lot of strain on e-commerce supply chains.

Here is the impact panic buying makes on retail supply chains

Modern supply chains depend heavily on in-time ordering and on instant warehousing. When times of such panic set in, it causes short-term supply shortage. However, it is not the only problem caused. It leads to deeper and more long-lasting effects on e-commerce and retail supply chains.

Problems in sourcing: Goods are sourced from some place, right? Well, when we consume things faster than they can be replenished from the sources, things become critical. Retailers typically measure our buying behavior based on historical data. It helps them to plan accordingly. However, just like instances like that panic buying due to the coronavirus, retailers just do not have the answer to it. These are impossible to foresee. As a result, retailers find it hard to source and keep things in their store available for all.

Inventory management is inconsistent: Panic buying causes something called the Bullwhip effect. It causes ups and downs in the retail and market inventory management. It happens during such uncertain times. At such times, retailers are hard pressed to replenish their stocks and keep a sufficient inventory. Large retailers are of course better off, in comparison to the smaller and local retailers.

Higher cost of logistics: Apart from entire states going into lockdown, the government has also forwarded other laws to deal with the virus problem. For instance, right now there are restrictions on exports, imports, trade and interstate movement of people and goods. This plays havoc on domestic logistic operations. Retailers are therefore not able to make quick deliveries. Not being able to execute day-to-day last-mile delivery operations increases the cost of logistics for retail supply chains.

Lack of visibility: Such uncertain times create a lack of visibility. When retailers are unable to see into the near future, it creates uncertainty and instability in business planning. This is especially true for manual retail planning.