Impact of Panic Buying on Supply Chains
By Cat Dewinta - January 16, 2022
Unpredictable health situations around the world raise panic in consumers which leads them to hoard essential products. Consumers find the sight of empty shelves disturbing because in ‘normal times’, just-in-time (JIT) manufacturing ensures that products will be available on time when needed. The JIT model means that goods and produce are prepared and delivered in the right quantity based on typical demand.
The Bottleneck of Panic Buying
In situations where consumer behavior changes drastically in a short span of time, it will disrupt synchronized production flows. Thus creating short-term logistical bottlenecks. In a simpler explanation, products are available, just not at the right time and place.
This is usually caused when consumers panic buys. Panic buying is a sudden, collective rush by consumers to buy goods or services. It often happens during a health crisis, when people fear that they may not be able to get essential items such as food and medicine. Panic buying can also occur during other types of emergencies, such as natural disasters or terrorist attacks.
When consumers panic buys, they often purchase more than they need. This can clog the supply chain and disrupt logistics operations. In the Philippines and other Southeast Asian countries, this has been happening a lot lately due to the spread of the COVID-19 virus.
How Does It Affect Supply Chains?
The effects of panic buying are not limited to the health sector as its effects pierce through other industries. In this case, supply chains and logistics are very much affected because of panic buying. Because of the latest COVID-19 variants, Delta and Omicron in Manila and other provinces people tend to buy more than usual due to fear and ignorance about the disease. However, this sudden increase in demand causes a shortage of supply because suppliers/manufacturers cannot meet the demands.
Other cases are when there is an urgent need to deliver medicines and supplies from one place to another due to emergencies such as natural disasters or political unrest, panic buying affects logistics operations not only by increasing demand but also by causing suppliers to prioritize emergency orders over other regular ones. This disrupts the normal flow of goods, which in turn causes delays and even shortages.
The impact of panic buying on supply chains and logistics can be very costly for businesses. It not only creates a shortage of essential supplies but also disrupts the delivery of goods, leading to lost sales and increased expenses for businesses. In some cases, businesses have to import goods from other countries, which can be very expensive. Thus, it is important for businesses to understand the effects of panic buying on supply chains and logistics operations so that they can take appropriate measures to mitigate its impacts. By doing so, they can ensure that their supplies are not disrupted.
Prepare Operations for Sudden Demand Changes
Panic buying can have a significant impact on businesses, especially those with complex supply chains and logistics operations. Here are some tips to help your business prepare for the effects of panic buying:
- Make sure you have an adequate inventory of goods to meet consumer demand. This will help ensure that you don’t run out of stock during a sudden increase in demand.
- Establish relationships with suppliers so that you can receive the supplies you need quickly to meet demand without disrupting your operations or adding additional costs.
- Have a plan in place on how you will handle increased demand and ensure that your operations will run smoothly. This may include hiring additional staff or increasing production capacity.
- Communicate with your customers about any disruptions to your normal operations so they are aware of what is happening and can plan accordingly.
By preparing for the potential impact of panic buying on your business, you can help ensure that it does not disrupt your operations and put a strain on the supply chain.
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