The coronavirus disease (COVID-19) outbreak affects the international transportation system and the unusually high demand for some products, causing many products to be out of stock.
We shall see a lot more research on robust optimization and the consideration of uncertainty sets. Optimization was squeezing the last drop out of everything leaving no more room to react on any disturbances. Issues like load-dependent lead times need to be rejuvenated under this regime.
BTW: This will not be about hoarding, though there will be some research on this.
I suppose that considering this topic in research is an interesting idea, partly in the field of maritime transportation. For example, due to COVID-19 there is an actual shortage of empty containers. Subsequent escalation of this could result in a disruption in the container shipping chain. The last one is crucial for the modern global economy.
Many transport / logistics systems exhibit what economists have long recognized -- the structural indivisibility of assets -- you cannot decide to scale up or down by the kinds of small amounts that might be suggested by a continuous optimization model. (Joan Robinson famously discussed STEEL and LEETS.) Rather, we have discrete chunks of infrastructure that are either on or off. So, if we want to scale back capacity, we have to do so in big blocks, or conversely we have to respond to shortages in relatively large responses.
I have noted that in response to emergency orders, flows will want to get ahead of infrastructure -- so if we evacuate or require mass movement, we have to know that we will create excess demand for travel on certain routes, while others may actually dry up. I think that the consideration of redeployment of assets is a good research question to provide guidance on coping with (hopefully short run) out of kilter situations.
The concept of a "stress test" that was used for financial institutions might well be applied to transport firms. Which will be able to weather the storm, and which will be best equipped to rebound?
The real question is how long current supply chains will endure before they collapse. Most of the imported goods are quarantined, which takes up a lot of space and the goods do not reach the end user within the planned timeframe - then again, the new incoming goods can contaminate the previous one already undergoing quarantine and the circle is broken. I'm not sure every storage unit can provide the same security or safety measures. We face the problem of transporting and storing goods, and shutting down transportation to end users (so the problem of first- and last-mile carriers becomes even more problematic in the given circumstances). Existing supply chains will need to be redesigned and reconstructed in order to be sustainable in the coming crisis period. I hope experts create safe and sustainable measures or standards and protocols that will apply in time.
I think the topics that require attention will be risk management, and also, contingency planning and emergency response.
One trend that I notice, is the changing of stakeholders' attention from "more frequent" risks to "low-prob but high consequence" risks. While technologies are mostly applying to supply chain management in solving day-to-day risks, the instabilities observed recently suggest that the environment of supply chains is showing many uncertain factors that the traditional prediction models are struggling to predict. How much data we need to prioritize these fundamental changes above casual, daily operational risks. So the frequentists and realists are facing more difficulties in explaining reality, based on solely objective probability and statistics...
I think there will be more studies on deglobalisation and deinternationalisation of supply chains as the effect of supply shortage and lock down in many countries. It will be more visible in some strategic products important for such unusual situation. We can observe also development of the studies on humane supply chain management.
For transportation and supply chain research, this pandemic will definitely be a case study to emergency respond in outbreak and idenfication of "passive" means of transportation mode to maintain supply chain disruption. Some other broad research thoughts will be:
1. Risk measurement and forecasting for transportation and logistics in outbreak
2. Bullwhip effect of epidemic/ pandemic
3. Spill over affect in transportation and supply chain
4. Humanitarian logistics based on Covid-19 case study.
5. (Please increase the list, if someone has broad topics)
The current situation also brings forth some actions that will not surprise anyone who thinks in terms of allocation of scarce resources and optimization:
(1) Arbitrage. Creative individuals will attempt to exploit excess demand by buying up supplies of key materials, marking them up, and pocketing the difference. One example is currently in the news where some guy traveled to many rural stores and bought up supplies (say hand sanitizer) and relisted on Amazon. Anyone who understands shadow prices in linear programming will know what is going on here. (BTW, there has been a clamp down on excessive price gouging.)
(2) Supply chain surprises. Suppose you need paper for your product packaging. What happens if paper raw materials are diverted to other needs? The knock on effect of a shortage in one area could impact the delivery of other somewhat unrelated products.
(3) Dipping into strategic reserves. The US has huge stockpiles of medically related materiel that can be rolled out to fill gaps in current commercial supplies. There may be enough to buffer short term intense spikes, and because their entire reason for existence is to deal with these emergencies, I have to believe that the logistics roll out could be very swift.
While causing several disruptions in short- and mid-term, in long-run, COVID-19 will indeed contribute to and expedite the so-called supply chain reglobalization process. I invite colleagues to submit their relevant manuscript to our special issue run by IJPDLM:
Dear Colleagues and Friends from RG, Many current analyzes show that the impact of Coronavirus causing Covid-19 disease will also be very large on the global economy. In 2020, the recession of the global economy is very likely. In 2-3 months, the global economic crisis may appear the largest since the 1980s and in some countries the largest since World War II. One of the factors that significantly reduces the scale of production is not only the rapidly falling demand for specific services and products, but also the suspension of production processes for specific ranges of components, semi-finished products, spare parts, in countries where the scale of Coronavirus infection is high. As a result, logistics chains break off, specific components and semi-finished products are not delivered on time to plants, assembly plants where final products are produced in other countries. Because on a global scale, internationally conducted transport, distribution and supply logistics, many logistics chains are composed of at least several stages of intermodal transport, so the risk of delays in providing the necessary assortment for final production carried out in other countries is high. Therefore, the risk of maintaining business continuity and maintaining production at an optimal level increases. As a result of these problems, decisions are made in many enterprises to transfer the production of necessary components and semi-finished products to other countries, to other economic regions of the world, to other continents in order to shorten and simplify intermodal, international logistics chains transporting a specific range of manufactured semi-finished products or final products.
I think due to lockdown and the spread of coronavirus, it is causing a shortage of certain products and therefore leading to hiking of their prices. also, the supply chain is broken down, due to the issue of demand and supply, most people are just buying what is essential for their survival and other products are left to waste. In conclusion, LSPs' are not spared for the reason that imports must be quarantined for a longer period and therefore, this requires a huge space. Whereby first in first out principle cannot be observed hence supply chain breaks down continuously, in addition, by the fact that the tracks, submarines ships and containers are controlled and driven by humanity, might as well fuel the spread of COVID 19 further. Finally, the world might experience a recession of the global economy worse ever than world war II and this can bring the entire world to its knees, despite of the developed nation not able to do even the least, even with all the technologies and types of machinery, they've got.