The coronavirus outbreak has emerged from an epicenter of manufacturing in China, and the crippling effect of the quickly spreading virus has a death grip on the supply chain’s inputs and raw materials.
Wuhan, in China’s Hubei province where the infection was first reported, is a major industrial and transport hub in the center of the country, where there are at least 11 apparel factories, as well as thread and textile factories, printing and dyeing facilities, and footwear manufacturers. Auto parts are Wuhan’s leading output, followed by electronics parts.
According to a new DHL report, the region “has triggered full or partial lockdowns in 13 Chinese cities that have severely restricted key land, air and maritime transport routes from across the country.” The lockdowns have prevented non-emergency vehicles from entering or leaving Wuhan, and pick-up and delivery services (for goods other than medical supplies) in other cities in and around Hubei province have been significantly curbed—if not cut off altogether. Flight cancellations to and from China continue to pile up by the day.
As such, raw material movement is in jeopardy.
“Severe disruptions to inbound and outbound air cargo shipments, trucking and rail cargo services, as well as heavy port congestion for vessels along the Yangtze River near Wuhan will likely persist as the coronavirus crisis unfolds,” DHL said in its Resilience360 special report. “The regional lockdown has already severely impeded logistics operations that rely on access to highways to carry goods into and out of the region…”
What’s more, the lockdowns reportedly remain in effect, even after what was supposed to be the adjusted end to the Chinese New Year break, which would have been on Sunday.
“Companies and factories in several major cities and provinces—including Beijing, Zhejiang, Jiangsu, Guangdong and Shanghai—have been ordered to halt their operations until at least February 9,” DHL noted.
Cargo that had already arrived in Wuhan, or that’s stuck in transit points like Hong Kong and Shanghai, could be held in place until the situation surrounding the outbreak improves, which may not be soon at all.
Delays will hit the supply chain, however, before factories even get to factor in the drop in productivity.
Under normal circumstances, if workers had returned to factories at the start of February, it would have taken up to three weeks for operations to fully resume, according to DHL estimates. As of now, Feb. 10 is just days away and there’s no telling yet whether workers will even return to their posts as currently scheduled. Even in the best case scenario, that means production operations likely wouldn’t return to normal until at least March.
“Should China’s authorities struggle to contain the spread of the coronavirus beyond the Lunar New Year period, this could have a major impact on industrial production and the availability of supply coming out of China,” DHL said.