March 12, 2020
In the Media

Now that many employers, schools, and governments are instituting "social distancing" to try and slow the spread of the coronavirus, the disruption to supply chains is likely to get much worse before it gets better, said Yossi Sheffi, director of the MIT Center for Transportation & Logistics. The initial impact of the outbreak on businesses, he said, seemed to be limited to the supply side: factories shut down, manufacturers couldn't get parts, there weren't enough boats and planes to move products around the globe. Now, it's also a demand problem. Because more people staying in and working from home — or being quarantined -- means fewer people out in the world buying stuff.

Sheffi told WBUR that a decrease in consumer demand is likely to result in a "bullwhip effect": Retailers, seeing less demand from consumers, order less from wholesalers; wholesalers order less from manufacturers, and manufacturers order less from their suppliers. And so on, and so on. In the coming months, Sheffi said that bullwhip effect, combined with the supply disruptions caused by the outbreak and a major slow down in consumer spending, will likely have negative consequences for the economy. "I expect this will be like 2008, 2009," he said. "There will be a worldwide recession."

Last week, Sheffi released the results of an informal survey of roughly 700 supply chain professionals from North America, Latin America, Europe, Asia and Africa. What he found was that "many of the companies polled appear to acknowledge that the worst is yet to come."