Market trends

The impact of COVID-19 on global supply chains

Kailey Raymond

|

March 6, 2020


Airplane and globe with blue freight train.
Airplane and globe with blue freight train.

Supply chains across multiple industries have seen impacts in production due to the coronavirus outbreak in China. With workers at home and factories temporarily closed, the disruption is causing a broad range of companies to report uncertainty in their financial performance.

As global COVID-19 cases continue to increase, particularly in the United States and in Europe, how are companies communicating supply chain impacts? We’ll be updating the post with commentary from management teams regarding supply chain impact from the Coronavirus.

Takeaways

  • Companies across sectors are still unsure about the direct impact of supply chain delays on their bottom line.
  • Many companies refer to global supply chain issues while maintaining that their specific supply chain interruptions will not be enough to have a material impact on their 2020 financial results.
  • Volkswagen suspended production until April 9th, due to decrease in demand for automobiles and the challenges in the supply chain due to COVID-19.
  • FedEx says they “remain well positioned to adjust to market conditions to assist our customers as they work to manage their supply chains and inventories. Due to the crucial role we play in moving supply chains and delivering critical relief, FedEx is considered an essential business and is continuing to operate under state-of-emergency and shelter-in-place orders recently issued in the U.S. and globally.”
  • Companies, such as Ross Stores Inc. temporarily closed stores.
  • Companies like Adobe, Nvidia, and Best Buy have all recognized that supply chain disruptions could significantly impact their businesses and distribution systems.

[Note: We are updating this post and our compilation post to reflect the most recent commentary. Last updated 4/5.]

FedEx (4/3 – 8K)

We remain well positioned to adjust to market conditions to assist our customers as they work to manage their supply chains and inventories. Due to the crucial role we play in moving supply chains and delivering critical relief, FedEx is considered an essential business and is continuing to operate under state-of-emergency and shelter-in-place orders recently issued in the U.S. and globally. We are flexing our network and making adjustments as needed to align with volumes and operating conditions. We are taking additional measures and incurring additional expense to protect the health and safety of our employees, contractors, and the public and are working with customers to accommodate special requests around modified store hours, closings, and delivery alternatives to comply with applicable government restrictions and safety guidance.

We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial condition and results of operations, to be dictated by, among other things, its duration, the success of efforts to contain it and the impact of actions taken in response. While we are not able at this time to estimate the impact of the COVID-19 pandemic, an extended period of global supply chain and economic disruption could materially and adversely affect our business, results of operations, access to sources of liquidity and financial condition. In addition, an extended global recession caused by the COVID-19 pandemic would have a further adverse impact on our financial condition and operations.

Ross Stores (3/31 – 10K)

A disruption within our logistics or supply chain network could adversely affect our ability to timely and efficiently transport merchandise to our stores or our distribution centers, which could impair our ability to meet customer demand for products and result in lost sales or increased supply chain costs. 

Due to the current economic uncertainty stemming from the COVID-19 pandemic, we have temporarily suspended our stock repurchase program as of March 2020, and plan to continue to monitor the situation based on business conditions and regard for our financial liquidity needs.

Due to the COVID-19 pandemic and related economic disruptions, and with the temporary closure of all store locations effective March 20, 2020 through April 3, 2020, (and with extended or further closures possibly necessary), we anticipate that we will be required to rely far more heavily on our cash reserves and lines of credit, and we expect to carefully monitor and manage our cash position in light of ongoing conditions and levels of operations.

Volkswagen (3/27 – Press Release)

Volkswagen AG (Xetra: VW), a Germany-based automaker, has suspends its production at its passenger cars brand, commercial vehicles and Volkswagen group components until April 9.

The automaker has taken this step due to decrease in demand for automobiles and the challenges in the supply chain due to the coronavirus outbreak.

The company stated that the application for an extension of short-time working for a total of 80,000 of the automaker’s employees has been submitted and it plans to end short-time working with the night shift of April 9 to 10.

Te Connectivity Ltd (3/26 – 8K)

We could suffer significant business interruptions, including as a result of COVID-19.

Our operations and those of our suppliers and customers, and the supply chains that support their operations, may be vulnerable to interruption by natural disasters such as earthquakes, tsunamis, typhoons, or floods; or other disasters such as fires, explosions, acts of terrorism or war, disease or other adverse health developments, including as a result of the Coronavirus Disease 2019 (“COVID-19”), or failures of management information or other systems due to internal or external causes. 

COVID-19 is currently impacting countries, communities, workforces, supply chains and markets around the world and as a result we have experienced disruptions and restrictions on our employees’ ability to travel, as well as temporary closures of our facilities and the facilities of our customers, suppliers, and other vendors in our supply chain. COVID-19 may have a material impact on our liquidity, financial condition, and results of operations. The extent to which COVID-19 will impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted. Such developments may include the geographic spread of the virus, the severity of the virus, the duration of the outbreak, the actions that may be taken by various governmental authorities in response to the outbreak, and the possible impact on the global economy and local economies in which we operate.

Micron Technologies (3/26 – 10Q)

The effects of a public health crisis caused by the COVID-19 outbreak and the measures being taken to limit COVID-19’s spread are uncertain and difficult to predict, but may include:
 A decrease in short-term and/or long-term demand and/or pricing for our products, and a global economic recession that could further reduce demand and/or pricing for our products, resulting from actions taken by governments, businesses, and/or the general public in an effort to limit exposure to and spreading of such infectious diseases, such as travel restrictions, quarantines, and business shutdowns or slowdowns;
 Negative impacts to our operations, including reductions in production levels, R&D activities, and qualification activities with our customers, and increased costs resulting from our efforts to mitigate the impact of COVID-19 through social-distancing measures we have enacted at certain of our locations around the world in an effort to protect our employees’ health and well-being (including working from home, limiting the number of employees attending meetings, reducing the number of people in our sites at any one time and suspending employee travel);
 Deterioration of worldwide credit and financial markets that could limit our ability to obtain external financing to fund our operations and capital expenditures, result in losses on our holdings of cash and investments due to failures of financial institutions and other parties, and result in a higher rate of losses on our accounts receivables due to credit defaults; and
 Disruptions to our supply chain in connection with the sourcing of materials, equipment and engineering support, and services from geographic areas that have been impacted by COVID-19 and by efforts to contain the spread of COVID-19.
 
The resumption of normal business operations after such interruptions may be delayed or constrained by lingering effects of COVID-19 on our suppliers, third-party service providers, and/or customers.

CSX Corp (3/19 – 8K)

As COVID-19 continues to spread and significantly impact the United States, CSX is taking a variety of measures to ensure the availability of its transportation services, promote the safety and security of its employees and support the communities in which it operates. However, public and private sector policies and initiatives to reduce the transmission of COVID-19, such as the imposition of travel restrictions, the promotion of social distancing and the adoption of work-from-home and online learning by companies and institutions, could adversely affect demand for the commodities and products that the Company transports, including import and export volume. In addition, COVID-19 and the related initiatives may result in supply chain disruption, which could have an adverse impact on volumes and make it more difficult for the Company to serve its customers.

NVIDIA (3/26 – 424B5)

The global pandemic of COVID-19 continues to rapidly evolve, and we will continue to monitor the COVID-19 situation closely. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. The extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the disease or treat its impact, related restrictions on travel, and the duration, timing and severity of the impact on customer spending, including any recession resulting from the pandemic, all of which are uncertain and cannot be predicted. An extended period of global supply chain and economic disruption as a result of the COVID-19 pandemic could have a material negative impact on our business, results of operations, access to sources of liquidity and financial condition, though the full extent and duration is uncertain.

Adobe Inc (3/25 – 10Q)

In addition, the ongoing COVID-19 pandemic could potentially disrupt the supply chain of hardware needed to maintain these third-party systems and services or to run our business.

Should financial market conditions worsen in the future, including from impacts of the COVID-19 pandemic, investments in some financial instruments may pose risks arising from market liquidity and credit concerns. In addition, any deterioration of the capital markets could cause our other income and expense to vary from expectations. As of February 28, 2020 , we had no material impairment charges associated with our short-term investment portfolio, and although we believe our current investment portfolio has little risk of material impairment, we cannot predict future market conditions, market liquidity or credit availability, and can provide no assurance that our investment portfolio will remain materially unimpaired.

Thermo Fisher Scientific Inc (3/24 – 424B5)

COVID-19 is having, and will continue to have, an adverse impact on our operations, supply chains and distribution systems, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking. Due to these impacts and measures, we have experienced, and will continue to experience, significant and unpredictable reductions or increases in demand for certain of our products. 

IHS Markit LTD (3/24 – 10Q)

There may also be lower activity levels in the end markets we service or declining financial performance of our customers, which could result in lower demand, cancellations, reductions, or delays for our products and services, or in lower revenues. The extent to which our results are affected by COVID-19 will largely depend on future developments which cannot be accurately predicted and are uncertain, but the COVID-19 pandemic or the perception of its effects could have a material adverse effect on our business, financial condition, results of operations, or cash flows.

Best Buy Co (3/23 – 10K)

Concerns have rapidly grown regarding the outbreak of COVID-19. As the pandemic continues to grow, consumer fear about becoming ill with the virus and recommendations and/or mandates from federal, state and local authorities to avoid large gatherings of people or self-quarantine have increased, which will adversely affect traffic to our stores.In particular, we recently announced a shift to enhanced curbside service only for all of our stores on an interim basis. Further, all in-home installation and repair has been temporarily suspended and all in-home consultations are being conducted virtually.

The significant reduction in customer visits to, and spending at, our stores caused by COVID-19 will likely result in a loss of sales and profits and other material adverse effects. We may further restrict the operations of our stores and distribution facilities if we deem this necessary or if recommended or mandated by authorities and these measures could have a further material impact on our sales and profits. Also, if we do not respond appropriately to the pandemic, or if customers do not perceive our response to be adequate for a particular region or our company as a whole, we could suffer damage to our reputation and our brand, which could adversely affect our business in the future.

COVID-19 also impacted our supply chain for products we sell, particularly as a result of mandatory shutdowns in locations where our products are manufactured. We could also see significant disruptions to our supply chain in the U.S. as well as significant deterioration in macroeconomic factors that typically affect us, such as consumer spending.

Dollar General Corp (3/19 – 10K)

As of the date of this filing, we do not anticipate that supply chain disruptions either known or experienced to date as a result of the COVID-19 outbreak are likely to have a material impact on our financial results in 2020. However, the extent to which the COVID-19 outbreak may impact our distribution network, results of operations (including sales) or business in the future is uncertain as the situation continues to evolve, and such impact could be more significant.

Clorox Co (3/18 – PR)

Free and Charitable Clinics are on the front lines providing access to health care and battling Covid-19 for over 2 million patients in communities throughout the U.S.,” said Nicole Lamoureux, President and CEO of the National Association of Free and Charitable Clinics. “In the face of this pandemic, our member organizations are challenged with dwindling resources and limited access to personal protective equipment for their staff and volunteers. This donation will allow clinics to continue the important work of providing health care to the uninsured and combating Covid-19, while ensuring their staff, volunteers and patients are safe in this uncertain time.”

As global supply chains have contracted as a result of the pandemic, Direct Relief has expanded its operations in the U.S. and globally.

Ford Motor Co (3/18 – PR)

While it is hoped this action will only be required for a short period, the exact duration depends on a number of factors. These include the spread of the coronavirus; national government and European Union restrictions on movement, including across borders; the supplier industry’s ability to supply components; and the return of customers to dealerships, many of which are now closed as part of the measures taken at a national level.

Fedex Corp (3/17 – 10Q)

We anticipate that weak global economic conditions will be exacerbated in the fourth quarter of 2020 by the impacts of the COVID-19 pandemic, including the disruption of manufacturing operations and supply chains around the world. While the global economy may recover quickly from repercussions linked to the COVID-19 pandemic, we cannot currently predict if or when the economic recovery will occur.

Baxter International Inc (3/17 – 10Q)

Our global operations expose us to risks associated with public health crises and epidemics/pandemics, such as the novel strain of coronavirus that recently originated in China (COVID-19). COVID-19 may have an adverse impact on our operations, supply chains and distribution systems and increase our expenses, including as a result of impacts associated with preventive and precautionary measures that we, other businesses and governments are taking. Due to these impacts and measures, we may experience significant and unpredictable reductions or increases in demand for certain of our products as health care customers re-prioritize the treatment of patients

Motorola Solutions (3/17 – Recommended cash acquisition of IndigoVision)

Although IndigoVision has made progress in recent years in limiting its exposure to China as it sought to diversify its supplier base, China remains a key part of IndigoVision’s supply chain. This exposure presents risks associated in the short-term with the COVID-19 pandemic currently affecting the region and, in the longer-term, with international trade and tariffs, particularly in the USA, a key region for IndigoVision as it expands, in light of the recently introduced National Defence Authorization Act (“NDAA”).

VF Corp (3/16 – 8K)

VF’s supply chain operations have experienced limited disruption to date as a result of the COVID-19 situation. Ongoing diversification efforts, such as re-directing manufacturing and materials sourcing, are underway in an attempt to mitigate potential future disruption. While it is not possible to gauge the full impact to VF’s supply chain at this time, VF continues to believe its global supply chain represents a key competitive advantage during periods of uncertainty and market volatility.

Burlington Stores Inc (3/13 – 10K)

Finally, if the COVID-19 pandemic continues to grow, our import supply chain could experience severe delays due to closed factories and/or reduction in processing capacity as a result of workers not being able to return back to work or other labor shortages, which could cause disruptions in our business, a loss of sales and profits, and other adverse effects.

Oracle Corp (3/12 – Q3 2020 Earnings Call)

So, there was a little bit of an impact actually in Q3, as certain components were in short supply. And so, in fact, once again, Q3 would have been even higher but for some shortages in components to our suppliers and to our suppliers’ suppliers as a result of the coronavirus in China. I think that we’re trying to work through all of that, and we’ll see what the availability is in Q4. We think some impacts may continue, but my guidance on this does include our ability to deliver some, but not all, of what we could possibly sell in Q4.

Broadcom Inc (3/12 – Q1 2020 Earnings Call)

But what we’ve seen so far is what happened in China, Asia, obviously. And that hit badly big but – so it could come from two parts, demand and supply chain. What we saw in the supply chain was not much impact partly because a lot of supply chain contract manufacturing and all that was not in China, part of it was but there was also inventory in the pipeline pre-COVID-19. So that kept supply chain going. So our supply chain has not been impacted to any meaningful level.

Dollar General (3/12 – 8K)

Based on information currently known by management, the Company does not anticipate that supply chain disruptions experienced to date as a result of the coronavirus outbreak are likely to have a material impact on its fiscal 2020 financial results. However, the Company continues to monitor this evolving situation, and there is no guarantee that this outbreak will not have a more significant impact on its business.

Caterpillar Inc (3/11 – CONEXPO Conference)

We’ve talked about, if you look around the supply chain – I mean the issue for us around the supply chain, where there potentially is risk in the current environment, probably is not necessarily our Tier 1 suppliers. It would tend to be your Tier 2, Tier 3 because these are smaller enterprises, are feeding into the larger manufacturers. So, in our top 25 suppliers, for example, at the moment, only 3 of those are Chinese vendors, so that is a signal. But obviously we don’t know, the other 22, where their supply chains go.

And so obviously if you’re thinking about a coronavirus type impact, particularly on the supply chain at this stage, we haven’t really seen anything. But obviously we are planning on the assumption that at some stage, some of those smaller Chinese manufacturers will have some impact somewhere along the line and building our contingency plans ready. And then obviously where we are sole sourced, that is the greatest area of risk and that’s obviously going to get the greatest degree of attention in the short-term.

Those places where we have alternative supply choices, we will continue to monitor those as well and obviously flex those through over the next few months. But obviously what we don’t want to do is end up in a situation where we either can’t produce or we are constraining ourselves on production. We have lived with that a little bit over the last couple of years. That has been a big challenge for us. So that’s a really big opportunity for us to unleash the supply chain a little bit better than we had done recently.

CSX (3/11 – JP Morgan Aviation, Transportation, and Industrials Conference)

Question – Brian P. Ossenbeck: All right. Thank you, Jim. So, you start-off with some of the impact of expectations from the coronavirus. Do you have any specific visibility that you can call out from within your supply chain? And if it does come back, there’s a concern that it might move a bit faster or need to move faster on the air, or on truck and that might kind of skip over the rail service supply chain. So, any thoughts on that, knowing it’s still early days?

Answer – James M. Foote: Yeah. We don’t have any unique visibility that everybody else can see. I mean, we know that there was an extended outage in China. We know there were a large number, an abnormal number of vessel sailings canceled. We expected as a result of that, volumes would be down. It takes a while for both cycles to get over to the West Coast. And sure enough, last week whatever it was down 10%, this week down 20%, it’s kind of what everyone anticipated.

The steamship companies, at least some of them, seem to have an optimistic view of a quick return to normalcy at least out of China. And so, we’re prepared if the – we’re – if anything based upon all of the changes we’ve made in the way we run the railroad today, we’ve proven the fact that we can pivot a lot faster, are a lot more nimble and can adapt to changes as they are thrown at us

AT&T Inc (3/10 – Deutsche Bank Media, Internet & Telecom Conference)

From a supply chain perspective, and I don’t want to suggest we’ve seen anything significant at this time, we continue to talk to our suppliers. Of course, when you think about the situation, we’re about handsets, and tablets, and watches, and those kinds of things, and other computer equipment, routers, and so forth. But so far, we’ve been in very good shape with that. We’ll see how long or if there’s an impact going forward, and we’ll leave it to our suppliers to kind of give their guidance in those kinds of things. But so far, we’ve been working closely with them and working through the entire corona situation.

Freeport – McMoran Inc (3/10 – 8K)

FCX also announced that there have been no significant disruptions to its supply chain or product shipments since the outbreak of the Coronavirus. The Company continues to monitor the situation closely and will carefully manage all costs, capital expenditures and production plans during this period of uncertainty.

AbbVie (3/9 – Press Release – Revised Guidance)

While helping respond to the COVID-19 crisis is a high priority, the company is committed to protecting the supply of Kaletra/Aluvia for HIV patients. AbbVie is actively assessing the increased demand for Kaletra/Aluvia and has taken steps to increase supply for COVID-19 patients without impacting treatment supply for HIV patients.

AbbVie continues to closely monitor manufacturing and supply chain resources around the world and does not anticipate any disruption to its medicine supply as a result of COVID-19.

ON Semiconductor (3/9 – Q1 Press Release – Revised Guidance)

ON Semiconductor Corporation (Nasdaq: ON), a supplier of semiconductor-based solutions, on Friday provided an update to its Q1 revenues outlook, which incorporates the potential impact of change in business conditions due to the novel coronavirus known as COVID-19.

According to the company, based on preliminary assessment of the current business environment, it anticipates that its revenues for Q1 2020 will be in range of USD1,275m to USD1,325m, as compared with the prior guidance of USD1,355m to USD1,405m, issued on 3 February 2020.

Reportedly, the company saw soft order trends in China in the weeks following Lunar New Year holidays, but orders have since picked up and it has not seen any significant cancellations of orders. Also, its factories in China have returned to normal levels of operations after mandatory shutdown following the end of Lunar New Year holidays.

However, public health outlook due to COVID-19 is uncertain and continues to evolve, and business impact of these conditions is difficult to forecast. This revised guidance is based on the information available to date, the company added.

Motorola Solutions (3/9 – Motorola Solutions Statement on Coronavirus Preparedness)

Motorola Solutions continues to closely monitor the widespread impact of the coronavirus, and the safety and well-being of our employees, customers, partners and suppliers remains our top priority.

CooperCompanies (3/9 – 10Q)

“… new regulations, global trade barriers including additional tariffs, the trend of consolidations within the health care industry and uncertainty regarding the scope and impact of the recent outbreak of the coronavirus referred to as COVID-19 on our sales and operations and on the operations of our significant suppliers and customers could impact our current performance and continue to represent a risk to our future performance.

Walmart Inc  (3/5 – UBS Global Consumer Retail Conference)

From a supply chain standpoint, we haven’t seen major impacts. So not much different than I would have said a couple of weeks ago. I do think in ways, the work that our merchants did around tariffs over the last 12 to 18 months helped us think about some things differently that are probably paying off some now and how you think about supply chain differently. It does feel like — I’m reading the same things you are, but it does feel like China is starting to kind of come back to work, which will help from a factory standpoint. And we’ll just have to keep monitoring it day-to-day, week-to-week.

Lowe’s Companies Inc (3/5 – UBS Global Consumer and Retail Conference)

Well, as recently as last night, I’m looking at factory production around the world and what their capacity is relative to where they’re accustomed to being. And so that’s the level of visibility we’re placing on this, tracking every PO, by manufacturer, by geographic location. And all I can say is we see no short-term negative benefits to our business. Our supply chain, relative to what we need for our spring business is either in the store, in the DC or on the water. And so we’re in a really good position there.

We’re going into this season, with our best in-stock position in over 5 years. So we’re really ready for spring. But beyond that, it’s hard to have clarity because we just don’t know what’s going to happen, but we’re staying close to it, and we’re going to be as flexible and as agile as we can.

Akamai Technologies Inc (3/5 – Morgan Stanley Technology, Media & Telecom Conference)

So in terms of the supply chain, there could be some timing issues. If there — we do have some component parts that come out of China. Most of our manufacturing is not done there in terms of our servers. We do a really good job of planning out in advance. So to the extent that this is a temporary shift, you may see some CapEx lower Q1, maybe it picks up a bit Q2, Q3. But we’re not anticipating anything that would have a major impact on the business at this point. But obviously, if this goes on for many, many months, it could have a little bit of an impact.

Autozone Inc (3/5 – UBS Global Consumer and Retail Conference)

Yes, we’re seeing some slowness coming from Asia, but the product — there is product flowing. Obviously, it isn’t flowing at the level that it needs to be. And it’s our understanding the factories are coming online and are progressing online, and the government is going through a certification process with each of the factories. And they’re ramping up, specifically the factories that are supplying us are ramping up. So we think that it will be, as we said on the call or Bill said on the call, it’s — the next few weeks will be critical as we kind of watch them continue to ramp up. To your point, you’re right. Our inventory turns relatively slow. We have X amount of weeks of supply in the system. We also have the ability to buy from ourselves, if we are able to rebalance out some of that inventory. So for now, we seem to be okay. And for what we can see in front of us, we don’t see a significant disruption. If things change, then we’ll have to address that when it happens. But at the moment, it feels as though we have inventory available. There’s inventory coming and will be coming based on our understanding. And so we don’t see this as being, at the moment, disruption of any great magnitude. I’m sure that there will be a little bit of a flow for the — our distribution folks as it will be for any company, who is getting very low volume right now and will get ramped up pretty significantly.

Zebra Technologies Corp (3/5 – Morgan Stanley Technology, Media & Telecom Conference)

 Obviously, the coronavirus makes a very fluid situation. Lots of news coming out every day and lots of reactions… For us, it has been predominantly a supply chain impact. In our call 3 weeks back, we did highlight some softness in China from tariffs and from the coronavirus, demand issues. But since our supply chain is largely China based, that was the bigger issue. We have dedicated teams that are working very closely with all our Tier 1, Tier 2, Tier 3 suppliers to make sure that we are in contact several times a day to make sure we have up-to-date information that we can help if there’s issues and stuff. The supply chain is definitely coming back to life in China. They’re definitely ramping up. Depending on the supply — the contract manufacturer or the region they’re in, they’re slightly different ramps. If they source more people from Wuhan, they might be a little slower to getting back into gear, but todays its definitely either people are almost at capacity or getting at towards capacity. So from what we’ve seen so far, it seems to be kind of developing in a reasonable fashion.

Hewlett Packard Enterprise Co (3/5 – Morgan Stanley Technology, Media & Telecom Conference)

On the supply chain side, obviously, we see an impact. And that’s where I said in the call, “Because of the uncertainty and because of the time the supply chain will time — will take to recover, we felt prudent, a, to not guide for Q2 because whatever number I give The Street, it will be wrong; and b, is to adjust the free cash flow for the timing of the recovery.” Because as you can imagine, the revenue will take a little bit of time to recover. And then you have the need to augment the inventory as you rebuild some of the buffers, because ultimately, you’ve got to get that motion in place.

And I will say I spend a lot of time with my suppliers. In fact, I have spoken to 50 of the top suppliers; and yesterday, to the top 2 suppliers. And I will characterize this as a recovery in progress. Most of the, what I call, the PCAs, PCBs, which are manufactured in China, we expect on the capacity side, recover between the next 2 to 4 weeks. Some of them will be online, but they are — all of them are online, but there will be a full labor capacity in the next 2 weeks to 4 weeks.

The question is the entire supply chain behind them, it takes a little bit of time because you think about the components that these people need to build these motherboards and circuit boards and other components, will take a little bit of time. But from a capacity perspective, between 2, 4 weeks, we expect them to be at full capacity.

And then there is all the other stuff we have to worry about, logistics. I was telling Katy before we came here, that — remember that 50% of the logistics is done through commercial airline and 50% through freight airlines. And when you have no commercial airlines going to China, and therefore, the bellies of these planes are not full or that people are not traveling, it is a challenge that we have been working through.

So I think I will say demand side, not a significant impact. We don’t see it yet. Supply chain, definitely, and will take 4 to 8 weeks to recover. And ultimately, we expect that to improve as we go along. And then also on the commodity side, we expect that to improve as well over time.

Costco Wholesale Corp (3/5 – Earnings Call)

In terms of supply chain, closures of many manufacturing facilities extended well beyond the typical 1 week Chinese New Year holiday, which was the last week in January. In many cases, factories over there were closed for 1 to 2 additional weeks. That’s now improving each week. Initially, 2 to 3 weeks of factory — so initially, there are 2 to 3 weeks of factory closures, not 1. Then about 3 weeks ago, and just pulling some of the buyers that — a deal with the factories, they felt there was a rough number of 20% to 25% production levels, moving up to 40% and now as high as 60% to 80%. But again, it’s improving, and this still has a little ways to go.

In terms of transportation issues, whether it’s Chinese New Year and then a couple of additional closure weeks. There were not only product issues but also trucking and port issues. These are also abating with port capacity in China improving each day as well. And I say port capacity, it’s also the shipping lines that come to the various ports.

Domestically, truck capacity is plentiful. However, exporting items, including KS items as well as other U.S.-manufactured items to our locations in Asia and Australia. It’s been a little bit of a challenge because of some container shortages here. But overall okay, just taking a little more work.

We’re finding other ways to handle any potential out of stocks by shifting SKUs to alternative items and categories, particularly in the areas of domestic goods, food and sundries and fresh.

Advanced Micro Devices Inc (3/5 – Financial Analyst Day)

From a business standpoint, it is a very dynamic situation. So let me give you some color to kind of give you, a view of what’s going on.

From an overall supply chain standpoint, our supply chain is primarily focused in China, Malaysia as well as Taiwan. And I would say, it’s a very robust supply chain. So we have taken a number of actions to ensure that we have continuity in that supply chain. And based on what we see today, we’re actually back to near-normal supply capacity in our supply chain.

So that is something that we continue to be very focused on. We’re also monitoring our customers, since a lot of our customers have supply chains that are very dependent on China and some of those operations. And we did see some disruptions, certainly through Chinese New Year and in month of February. There’s a lot of progress being made. I would say, all of us in the ecosystem are trying to return those operations to as normal as possible. And we expect that to continue over the next couple of weeks, I’m sorry, over the next coming weeks.

Western Digital Corp (3/5 – Morgan Stanley Technology, Media & Telecom Conference)

So we have a factory in Shanghai and a factory in Shenzhen that we were able to operate through that whole period of time. So that’s gone extremely well. We’ve done a lot of work in terms of the downstream supply chain, and it’s also done very well. We had a couple of suppliers that were in the Wuhan area. One of them is back up and running. One, we’re expecting to be back up and running on March 10. And from this quarter’s standpoint, we’re obviously burning into some of our buffer inventory, but we think we’ll be fine in terms of the shipments for this quarter. And that we expect to have our buffer inventories back to normal levels by the end of April.

Kroger Co (3/5 – Earnings Call)

We generally believe that we have limited supply chain exposure in China as the majority of the products we source is domestic. 

Dell Technologies Inc  (3/4 – Morgan Stanley Technology, Media & Telecom Conference)

And then the question becomes — it’s a question we think about a lot, which is — and then — let me go to the other part, and I’ll come back to that, which is around supply chain. So our supply chain, we’re in pretty good shape right now in the supply chain. We’ve — we had, had the — I think more — maybe more luck than not. We had our notebook factories running over Chinese New Year. We were paying overtime to our workers to work because of the building supply and inventory. And so we’re in pretty good shape on notebooks. Our server and storage capabilities are generally unaffected by this. We’ve had to adjust a few lead times in certain of our clients, those new products.

And so with what we know today — and there’s still certain factories that need to reopen in China. But we feel generally okay about our supply chain as long as they reopen in the time frame that the government says they’re going to be allowed to reopen. If that changes, then we’ll have to ship — we are spending a few extra dollars on logistics costs as you move parts and product around the supply chain, but that’s just — and some of the logistics dynamics are a bit more complicated these days.

Roku Inc (3/4 – Morgan Stanley Technology, Media & Telecom Conference)

Yes, in terms of coronavirus, what we mentioned is, today, we’ve only seen minor impacts, largely around supply chain in manufacturing. We had moved our Player manufacturing into Vietnam in the fall as a result of the potential tariff situation. But like the rest of the industry, a lot of the component supply chain runs in part through China. And so to the extent there’s continued disruption or significant disruption of the supply chain, so that can impact our ability to replenish our inventory.

Dollar Tree (3/4 – Earnings Call)

Our global sourcing group and merchants along with our logistics team are meeting daily and updating our progress on visibility to individual purchase orders. Generally, we are seeing production pickup, and factory attendance is increasing each week. Our global sourcing team in China and third parties that provide quality assurance inspections are nearly at normal levels. All ports and third-party freight consolidators are open and operating at near-normal levels, and we are getting all needed space on vessels for our freight. At this point, all of our Easter merchandise and lawn and garden seasonal product is in our domestic supply chain, either in distribution centers or flowing to stores. At this point, we see a very small percentage of product canceled and some products moving on to later delivery, usually by a few weeks. And our teams are working to mitigate with sources elsewhere, including domestic sources, to mitigate any effect there. More to come.

Xilinx (3/4 – Morgan Stanley Tech Conference)

With respect to impacts to the company on the supply side, we don’t have — most of our supply chain is not in China. So we don’t see any impact of availability of products. With respect to the demand side, we haven’t seen capacity normalizing post-Lunar New Year, to the extent we would have expected by now. And so while the impact currently has been modest, I think the expectations are if this obviously is protracted, global consequences, there could be more meaningful impacts to the business in subsequent quarters.

Home Depot (3/4 – Raymond James Conference)

So on our global supply chain, I would say, for Q1, we’re in pretty good shape. So product for Q1 is largely in our stores. So Q1 and 2, for us, is a big strength. Spring and outdoor project business, we’re largely set. So all our merchandising space has largely transitioned to spring product. We’ll be finished with that in our northernmost markets in the next week or 2. But — so all that product that comes in, think grills and patio sets and the outdoor power equipment I was talking about previously, for Q1, that product is largely in-store, in our supply chains or on the water.

Q2, I would say, it’s a very fluid situation. So as you say, we have very strong relationships with our supplier partners. For our direct imports, where we’re working directly with factories in Asia, we are in constant contact with them and monitoring their capacity and how they’re getting back up to speed and what their shipping horizons, timing is going into Q2. It’s fluid. We’re literally looking at this PO to PO. The good news is the ports are open and functioning. We haven’t had delays in ports. It’s really a matter of workers getting back to factories from the Chinese New Year. Most of those workers or many of those workers are in residence at the factories. And for those 2 weeks of Chinese New Year’s, they travel home to wherever their provinces may be out of the major cities. So it’s been a transportation issue in restrictions of travel intra-country to get those workers back to the factories.

So again, we’re in contact, varying degrees, as you can imagine, of building back to capacity. The next set of suppliers are suppliers that, while we don’t procure directly from China, we know the country of origin is China and Asia. And we’re in constant contact with them, starting to build orders into Q2. Again, it’s PO to PO. You’re obviously not going to order too deep into Q2. You just — the supply chain won’t handle that sort of cube. So we just have to keep working it. Nothing alarming at this point. 

Sirius XM (3/3 – Morgan Stanley Conference)

We’ve checked supply chains with the OEMs. And honestly, things look — looks pretty good. The supply chain for automotive is fairly long as I think most people know. And so if it goes on for a couple of months, I think there’s probably not a whole heck of a lot of impact on us. If it goes on for much longer than that where people can’t get in. We can’t get printed circuit board supply, right? That could be an issue. But it’s got to run for a few months before we think we start to see anything. So other than that, it’s just keep cracking away the business everyday.

Hewlett Packard Enterprise (3/3 – Earnings Call)

Additionally, the outbreak of the coronavirus at the end of January impacted component manufacturing, resulting in higher quarter end backlog.

Also, we do feel it is prudent to revise our fiscal year ’20 free cash flow outlook from $1.9 billion to $2.1 billion to $1.6 billion to $1.8 billion, given that we expect some impact on cash conversion cycles driven by the ongoing recovery from supply constraints and impact of the coronavirus.

Unfortunately, this is also causing supply and demand disruptions and affecting our revenue profile. The outbreak at the end of January started to impact component manufacturing and resulted in constrained supply and higher quarter-end backlog worldwide, and we have been in constant contact with our suppliers and are establishing specific mitigation and recovery plans. So this is affecting our revenue profile for the full year. This is why we’re not guiding in the short term. And relative to what we said at SAM, where we were experiencing — we’re thinking we would be returning to growth in fiscal year ’20, I don’t think that it is likely at this stage that we’ll grow in fiscal year ’20, as a whole for the fiscal year. But we do anticipate recovery of those supply chain constraints over time and face easier comps during the course of the year.

Obviously, this is very fluid at this point in time. There is uncertainty. We have a daily process with each of our suppliers that we managed very, very tightly. And some of those suppliers are dependent on other suppliers because, as you can imagine, the supply chain is a little bit longer with Tier 2, Tier 3 suppliers that provide what I call low-level components to build what I call the printed circuit boards or the PCIs or the PCBAs, and that’s a challenge we see today. And we see recovery, but obviously, it’s going to take time. And that’s why Tarek said we cannot provide right now a definite guidance. I think it will be not appropriate. And that’s why we felt prudent not to provide Q2, but because the recovery is going to happen through the year that we felt comfortable reaffirming the 2020 guidance.

Ross Stores (3/3 – Earnings Call)

As noted in our press release, our guidance does not reflect the potential unknown impact from the evolving coronavirus outbreak. While we’re closely monitoring the situation, there remains a high level of uncertainty over supply chain disruptions in China. In addition, it is unclear how a further possible spread of the coronavirus could negatively impact U.S. consumer demand.

Digital Realty Trust (3/3 – Citi Conference)

From a supply chain standpoint, we are — obviously have the potential risk of impact given numerous components within our 4 walls. Could be manufactured or imported for some of the countries impacted. From our advanced discussions that well predate today where we are on this coronavirus. We feel that we look — appear to be insulated, whether it pertains to batteries, UPS, switchgear, for at least 12 months’ worth of time. So, so far so good. But again, as I mentioned in the opening statements, we don’t know where this is going.

AT&T (3/3 – Morgan Stanley Conference)

I do expect that there are going to be some impacts that flow through handsets, especially for those vendors that are more oriented towards China. And we’re already starting to see that happen. I don’t expect that those shortages are going to be anything that probably impact first quarter dynamics in any significant way for voice postpaid kind of constructs around things. We’re seeing some things in prepaid entities, like if — I shouldn’t say prepaid, but watches, tablets, maybe some shortages popping up there that are particular SKUs that may have some nominal impacts, but it’s not significant.

Look, I think the vendors right now are fairly optimistic that this is contained and it’s going to be isolated to several weeks of delay for particular SKU items, not that there’s going to be complete stockouts. I think this morning, Foxconn indicated that they felt like they were starting to get some of their production in China turned back up and that they would get themselves back to somewhat normal constructs around the end of March. Obviously, once they get back to normal at the end of March, it takes a period of time for that to work its way through the entire supply chain and replenish. But if that in fact happens, then we expect it’s going to be relatively contained and manageable, and all the tactics we’ve used to stockpile and allocate those types of things should be able to get us through with some reasonable confidence.

Alnylam Pharmaceuticals (3/3 – Cowen Conference)

I mean, we’ve done — obviously, as all companies are doing right now, done a systematic review of our supply chain in light of the COVID-19 epidemic, and we are in a very good position. We don’t see any implication for our commercial or clinical products. Most of our — we do no drug substance manufacturing or drug product manufacturing in China. And we do that in either the U.S. or in Europe as a company. And we have no — we have sufficient inventory of all of our commercial products as well as clinical development programs as well. So there’s no supply chain implications. Now turning to specific markets and where there might be issues, thus we can talk about Japan. Japan is a big market for us. It probably will exit 2020 as our second largest market. So far, we haven’t seen any implication of the COVID-19 epidemic in Japan.

Verizon (3/3 – Morgan Stanley Conference)

As you see on the handset side, I think there is a risk on the equipment revenue side that we’ll see an impact there. Not so much in the first quarter. Obviously, there was handsets in the pipeline as the impact started to come through. But if we see continued disruption, you’ve heard some of the handset companies talk publicly about. If that carries on for a significant time period, I think we’ll see a more material impact on our equipment revenue line. That doesn’t really impact the earnings profile as significantly for us, given that it’s not where most of the earnings come from. The earnings come from the service revenue. But certainly, there may be some — in the future months some impact on the equipment. So we’ll have to wait and see.

And then you mentioned on the network side and not seeing anything material impacting our supply chain at this point. But I think, obviously, the major thing is, this is obviously a fluid situation, and we’ll have to wait and see how it continues to evolve. And as it evolves, if it’s going to impact either the income statement as we think about revenue or consumer behavior or the way that our supply chain on our network side will operate, we’ll update everyone as appropriate. But as of right now, not a material impact, but we’ll wait and see how it plays out.

And obviously, we’ll have to see how if the supply chain around that gets disrupted with the coronavirus. But we still have line of sight to 20-plus 5G devices coming into our ecosystem during the course of 2020. You’ve seen some of those announced already. You’ve got the Samsung models launching later this week. So absolutely still feel good about seeding the ecosystem with a lot more 5G devices this year than what we saw last year.

Autozone (3/3 – Earnings Call)

As you would expect, over the last month or so, we have been very focused on the supply chain aspects of coronavirus and, in the last week or 2, more and more focused on what’s happening here in the United States and, ultimately, Mexico and Brazil. We see no indications at this point in time of any demand destruction as a result to coronavirus. But just like we said with the supply chain, it’s an incredibly, incredibly fluid situation. I think the next couple of weeks to a month, are going to be critical to see what actually happens. We don’t have good insights into that.

Chevron (3/3 – Analyst Meeting)

First, let me address the short-term impacts of the coronavirus. No doubt, demand for our products is down. Our focus is on protecting our people and maintaining safe operations. This time, our operations and supply chains are functioning normally. We’re taking all appropriate precautions to keep it this way, but it’s a fast-changing situation.

United Rentals (3/3 – Evercore ISI Conference)

Supply chain seems to be what’s been disrupted in most industries right now. We have not had this disruption. And I wasn’t here for all of Terex’s commentary, but our suppliers have not pushed out any lead times for us, the things that would be meaningful for our business. We haven’t had any of those impacts. That’s one of the areas where we think coronavirus is showing up early.

Qorvo (3/3 – Raymond James Conference)

As far as the commercial effects of the virus, we’re seeing both supply and demand effects. On the supply side, some parts of the supply chain are experiencing reduced labor, which is limiting throughput. There have also been some isolated component shortages. At present, neither of these factors appears to be getting worse and from recent customer comments and our interactions across the supply chain, it may be getting better.

Trimble (3/2 – Morgan Stanley Conference)

What we — what I’d anchor you is on December — February 12 on our earnings call, we talked about the impact within a Q1 context and within a Q1 context, we quantified about 3 weeks of delay minus a couple weeks of buffer equal to about 1-week impact on the supply chain plus a degradation in the sales within the China market that was baked into our Q1 — I think, our Q1 guide.

Stanley, Black and Decker (3/2 – Raymond James Conference)

But probably the bigger question you have in your mind is our supply chain. Our supply chain in China serves 40% of our capacity across the company.

As it relates to the virus and where we are on China as far as our manufacturing capabilities as of today. We shut down these 10 plants for the 2 weeks of the holiday season around Chinese New Year. The week after that, these plants began to open up and the production capabilities and utilization have got to about 50%, 60% on average across those plants sometime last week. We’re continuing to make progress on that. And those numbers continue to improve as we sit here today. And we’re continuing to focus on getting more employees back to work, that’s one of the challenges we have right now, where all the employees have not returned to the plants. We have a process that we need to go through with every employee before they get into the plant around checking for fever and other symptoms that are visible and then, obviously, wearing masks within the plant to try to protect our employees as much as possible in that environment. We do believe it will take another 2 or 3 weeks probably to get to 100% utilization in these plants. And that obviously is assuming that the virus doesn’t worsen in China, that it stabilizes and begins to — to begin to go — retract or go backwards.

If that happens to get worse, then obviously, those numbers could change. But right now, that’s what our plans are, and we believe that’s achievable based on where we are today. This will cause some pressure for us in March and April from a revenue perspective. So we see that revenue in the last 2 weeks of March will probably be pressured based on these capacity challenges we’re having and also in the month of April. We do believe it’s more of a timing-related matter at this stage. But obviously, that’s very dependent on where the virus goes and how significant it is. If things stabilize, and we don’t see a dramatic worsening, we think that’s probably where we are. We have a timing issue we have to work through for the first half of the year and the full year as well.

Dentsply Sirona (3/2 – Earnings Call)

At the current time, we have not experienced a significant disruption to our global supply chain due to coronavirus. However, in many parts of China, dental clinics and hospitals remain closed for business. And in other parts of the world, we are beginning to see an impact.

Carlyle Group – Feb 28th – CS Conference

There’s definitely going to be a short-term financial hit. You can’t have half of the world’s second largest economy be dormant and not have an impact to global economy. You can’t have 55% of global manufacturing output go through China in some shape or form without there being a short-term hit. And I think people underestimate the disruption to the supply chain. We’ve got estimates of close to 60,000 containers that are in the wrong places, wrong ports, wrong railway stations because everything is disrupted. To get that all moving and going in sequence in the right way, it’s going to take a long time.

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Kailey Raymond

A customer-obsessed and data-driven marketer, Kailey Raymond leads Customer Marketing at AlphaSense. Previously, she was an early employee at two high-growth tech startups, in charge of launching new markets and building local communities.


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