Primark is assessing mitigation strategies for its supply chain © David Cliff/NurPhoto/Getty Images
Primark is assessing mitigation strategies for its supply chain © David Cliff/NurPhoto/Getty Images

Primark warns of potential shortages due to coronavirus

24 February 2020

Primark’s owner has warned the retailer may see shortages on shelves later this year if current delays to production in Chinese suppliers’ factories persist due to the coronavirus outbreak.

Associated British Foods said it typically builds up inventories prior to the Chinese New Year and it was well stocked for several months and protected from short-term impacts.

However, it added it was working closely with suppliers from China to assess the impact of the virus upon factories and supply chains and how this would affect the ability to fulfil current orders.

“If delays to factory production are prolonged, the risk of supply shortages on some lines later this financial year increases,” said Primark in a statement.

“We are assessing mitigating strategies, including a step up in production from existing suppliers in other regions.”

John Bason, finance director at AB Foods, said the company was talking to suppliers in Bangladesh, Cambodia, Vietnam, Turkey and Eastern Europe to make up the potential shortfall, according to Reuters.

But Bason said some items manufactured in China could not be replicated.

“There are accessories or whatever, areas like that, that China is very good at that are harder to source from elsewhere ... So I’m not guaranteeing that we can replace all of the shortfall from China,” he said.

AB Foods added that its China-based AB Mauri, AB Agri and Ovaltine factories were operating at reduced capacity due to labour and logistics constraints.

Meanwhile, in the US trade adviser Peter Navarro has used the virus as a justification for bringing home more of the pharmaceutical supply chain.

“We've offshored far too much of our supply chain, not just for corona, but also for the essential medicines we need,” he told Fox News

“Same reasons we offshored a lot of our other stuff: it's a cheap labor environment, lax environment, and most of all, unfair trade practices.”

Indian pharmaceutical manufacturers are facing a shortfall due to panic buying and shortages of raw materials from China, according to the Financial Times.

The price of azithromycin and other mainstream antibiotics has risen by 50% since January, according to Rahul Soni, chief executive of drug manufacturer Overseas Healthcare.

India gets 70% of its raw pharmaceutical ingredients from China. When it comes to critical antibiotics and antipyretics – medicines that reduce fever – the dependency is almost 100%.

Traffic restrictions and staff shortages have been putting the squeeze on Chinese manufacturers, especially in the disease-stricken provinces of Hubei and Henan.

Auto manufacturers are among the businesses most affected by the virus but German auto parts supplier Webasto AG has been particularly hard hit.

Eight of its 1,000 Stockdorf-based employees contracted coronavirus following the visit of a Chinese colleague for training in January, according to Bloomberg.

This forced the manufacturer to shut down operations at the plant for two weeks while around 180 employees were tested for the virus.

Orders for ships by Wah Kwong Maritime Transport Holdings, a company which jointly owns bulk carriers, tankers and LPG carriers, have been put on hold due to the virus, said Bloomberg.

William Fairclough, managing director, said: “We’ve got a couple of ships that are due to be delivered from shipyards in China, one in April and one in June, and we have already been sent a force majeure by the yard because they simply don’t have the workers.”

 Want to stay up to date with the news? Sign up to our daily bulletin.

LATEST
JOBS
Cambridge, Cambridgeshire
circa £55,000
Cambridge Assessment
New Town House, Buttermarket Street, Warrington WA1 2NH
Grade 10 £41,881 - £44,863
Warrington Borough Council
SEARCH JOBS
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates
GO TO CIPS KNOWLEDGE