The outbreak of the coronavirus in China and its global spread has much of the world on edge. The Chinese government has imposed the largest quarantine in human history, impacting 46 million people, in an effort to prevent the disease from spreading. Russia has closed its 2,600-mile border with China; the cruise ship Costa Smeralda and its 7,000 passengers and crew are currently being held at an Italian port after a passenger from Macau, China, fell ill with flu-like symptoms; earlier today, the World Health Organization declared the epidemic an international public health emergency; and on Monday, the U.S. stock market took its worst tumble since October over fears of how the illness and efforts to contain it would affect global supply chains. The vigorous response to the disease, focused on quelling its spread and public fears, has also left businesses on shaky ground, uncertain of how the coronavirus will affect their operations.
“Key for our sourcing teams at this point is that they will follow U.S. government recommendations to not have any unnecessary travel to China,” says Bill Mahre, CAS, president of supplier ADG Promotional Products. “They will continue to converse via electronic means but the face-to-face activities will be curtailed in the short-term until resolutions on this virus occur with the medical community. The Chinese New Year is in place right now so the timing of delaying travel is not unusual at this point. We hope that soon we will be back to normal travel plans and communication with our overseas production partners.”
Dave Sedlin, vice president of marketing at supplier ClothPromotions Plus Creative Sourcing Solutions (CPPCSS), says, “The coronavirus is definitely affecting all China suppliers—including CPPCSS—in a couple of ways. CPPCSS has seen increased communication—both direct and via social media outlets—as distributors seek other production outlets or alternative products for their clients. It has caused our domestic production to prepare and anticipate a growing demand for product. Of course, as we have our own staff in China, specifically Shenzhen and Yiwu, we are restricting their travel to essential trips only and certainly having them stay away from the affected areas. We’re also taking caution in what meetings are being accepted at our offices with factory and testing representatives. For now, most meetings are being conducted via WeChat and QQ [Chinese messaging apps] rather than in person.”
Alan Tabasky, vice president and general manager at supplier Bel Promo, says, “This will definitely cause disruptions as our plans to travel may very well change. We would not be attending the Chinese trade shows in April. Product compliance, however, will not be affected.”
With China being an integral part of the supply chain for many industries, including promotional products, an often-expressed concern is whether the virus can spread via goods imported from the country. Per the CDC, “There is still a lot that is unknown about the newly emerged 2019 novel coronavirus (2019-nCoV) and how it spreads. … While we don’t know for sure that this virus will behave the same way as SARS and MERS, we can use the information from both of these earlier coronaviruses to guide us. In general, because of poor survivability of these coronaviruses on surfaces, there is likely very low risk of spread from products or packaging that are shipped over a period of days or weeks at ambient temperatures. Coronaviruses are generally thought to be spread most often by respiratory droplets. Currently, there is no evidence to support transmission of 2019-nCoV associated with imported goods, and there have not been any cases of 2019-nCoV in the United States associated with imported goods.”
Sedlin adds, “The other main issue is how the virus will impact production at factories. We’re in the middle of Chinese New Year right now. A large number of the factories we deal with are in coastal cities while many of their workers are from inner China. That means much of the labor force has left the coastal regions to visit family during the New Year and we expect their return travel to be severely restricted by government policy and/or by personal safety concerns or fear. When the factories come back online after New Year, production slowdowns should be expected for all suppliers sourcing in China.
“Since the coronavirus is largely transmitted by human interaction, we do not expect any of our products to be affected directly. But we do expect delivery delays—primarily due to production slowdowns at first but potentially due to government activity in the future. It would not be unexpected for the U.S. government to restrict imports from China and subject them to incremental testing before allowing them in the country. Should the expected slowdown occur, the new CPPCSS joint-venture provides both domestic alternatives to distributors at the same time we are actively looking for other factory options in Asia and Central and South America.”
Tabasky says, “Chinese factories will be slow, possibly very slow, to spin back up to full production. We’re concerned about the receipt of post-Chinese New Year inventory. Short-term, the implications of this would be the possible increase in the number of out-of-stock products, as well as increases in supply chain and product costs as efficiencies suffer and raw materials become scarcer for factories. Long-term is more difficult to say. Possible price increases and more tariffs from the U.S. government on China if their consumption of U.S. farm products falls below quotas, and more supply chain country of origin changes from China to elsewhere where possible.
“With our clients, it’s business as usual. I don’t believe they’re aware of the potential impact on their promotional needs in the short-term. As we do quotes for larger, overseas orders, we have been adding some extra production time right now. Unfortunately, it is all estimated as the factories are still closed right now for Chinese New Year. As much as we can be, we have contingency plans for things like this. If this becomes a longer-term issue, we have risk mitigation plans to implement.”
The coronavirus—2019 Novel Coronavirus or 2019-nCoV, per the Centers for Disease Control (CDC)—was first detected in Wuhan, China. Two other coronaviruses have emerged previously, MERS and SARS, causing severe illness. Early on, many of the patients in the Wuhan outbreak reportedly had some link to a large seafood and animal market, suggesting animal-to-person spread. However, a growing number of patients reportedly have not been exposed to animal markets, indicating person-to-person transmission is occurring. The latest reports show that 8,000 cases of the disease have been reported, globally, including five confirmed cases in the U.S., and 170 people have died. While becoming a serious health crisis and presenting the medical community with several unknowns, to give a sense of scale of the coronavirus issue, as it now stands, so far 15 million Americans have contracted the flu this season and 8,200 have died from it; numbers the CDC describes as not far off from the averages.
