Panic Buying: Its Impact on the Supply Chain

As a result of the coronavirus outbreak, people have become like squirrels. Scared that their Government is, if it hasn’t already, going to implement a military style “total lockdown” to stop the spread of the virus, large numbers of people have flocked to supermarkets and are piling their trollies sky high to make sure they won’t run out of food. Some are even creating stockpiles in their homes of food and supplies so they essentially can “survive” the pandemic. Just like how squirrels gather as many acorns as they can find and store them so that they have enough to survive the winter.

Photos and videos of large queues at supermarkets and empty shelves have become rather common. This had led to more panic buying due to a mentality of “because other people are panic buying I should as well” and, consequently, to more and more gaps on the shelves. This effect is further amplified by government assurance that there are plenty of goods in the supply chain, while the reality of the consumer in front of the shelves represents the opposite. This disparity causes more panic among people and leads to them rushing out to buy everything they can get a hold of, even if they don’t need the particular goods in the current situation. A vicious circle.

Panic Buying and the Supply Chain

Panic buying has become more prominent due to the outbreak of Covid-19 and is affecting our supply chains. Toilet rolls in particular experience a huge increase in demand, as they have become somewhat of a symbol for panic buying these days. However, this isn’t the first-time panic buying has affected supply chains. Back in 1973, U.S comedian, Johnny Carson joked on the Tonight Show about the possibility of a toilet paper shortage and consequently, many Americans bought lots toilet paper from stores thus leading to a shortage.

The first product that seemed to become unavailable due to panic buying as a result of the coronavirus was hand sanitizer. It was then shortly followed by toilet roll, pasta and various types of tinned goods. Pharmacies also began to run out of paracetamol after false rumours spread that ibuprofen was dangerous to take, if you had the coronavirus. Subsequently measures have been put in place to limit the amount of these products which can be bought, in order to prevent panic buying. 

Yet, despite these measures there have still been noticeable gaps on supermarket shelves – but why?

Supermarkets are like well-oiled machines; they have a demand planning system in place where they can calculate how many units of each product are needed – and usually this is pretty accurate. However, the coronavirus pandemic is unprecedented times. Normally, supermarkets are used to planning months in advance especially for seasonal events such as Christmas and Easter where there is an expected increase in demand. However, no-one really could have foreseen and therefore planned for the increase in demand due to Covid-19.

Analysis by market insights firm Kantar has found that even if just a significant number of customers were just adding a few extra items to their shop, it had enough power to impact the supermarkets. This has become more common due to enforced home schooling and working. All meals are now cooked at home creating a higher demand for shop bought food rather than eating at least one meal from a school or staff canteen, which is supplied by a wholesaler.

As a result, supermarkets have run out of some products and have needed to order more. but the supply chain cannot offer more products out of thin air. Manufacturers may increase production, but it will take time for the production to be available for delivery. Then there will be a delay due to the process of logistics from the manufacturer to supermarket shelves.

How are supply chains combatting panic buying

Supply chains have implemented a number of different measures in order to combat the effects of panic buying:

Supermarkets

The effects of panic buying have been most noticeable in supermarkets. Subsequently, supermarkets have now introduced a range of new measures in order to keep stores open and shelves stocked during the coronavirus pandemic. In the UK, one of these measures include limiting the number of products a customer can buy, with harsher restrictions for products such as toilet rolls and hand sanitizers.

Also in order to ensure that supermarket shelves stay stocked up, for example in the UK, the Department for Environment, Food and Rural Affairs (Defra) has introduced a relaxation of restrictions that deliveries can be made to shops. With these new, temporary measures introduced by Defra, retailers will be able to deliver food and other products to stores in the middle of the night. This would have been previously restricted in residential areas to ensure locals aren’t disturbed during the night by deliveries.

Amazon

Amazon, unsurprisingly, have also been hit by an increase in demand. This is because many stationary shops were forced to close, and supermarket shopping became far less convenient. The increase in demand has been so high that customers are waiting weeks for Amazon Prime deliveries which would normally arrive the next day. To try and prevent this from happening, Amazon have hired 100,000 new workers to work in their U.S. warehouse and delivery services. However, despite these measurers, Amazon customers may also be left waiting longer for products than usual. This is because while there are no restrictions to the products that customers can buy from the company, Amazon is prioritizing getting essential goods from suppliers to consumers.

Closing Thoughts

The coronavirus is a global pandemic which none of us have experienced before and consequently processes that are normally in place may not be as effective during this time. Panic buying may be causing gaps on supermarket shelves for now but soon the supply chains will catch up to (and maybe even exceed) demand. The next challenge for supermarkets and food manufacturers is to work out when demand will decrease again to ensure revenues aren’t lost through having too much stock.

Header Photo: ozgurdonmaz – Getty Images