Panic buying can disrupt supply chain, create product delays

Coronavirus

HUNTSVILLE, Ala. – More than 900 people have been diagnosed with COVID-19 across the United States as of Wednesday at noon, according to the Centers for Disease Control and Prevention. As the number of confirmed cases continues to rise, so does the number of people that are ‘panic buying’ supplies.

Empty spaces where disinfecting wipes once were are becoming more common at grocery stores, like Star Market in Huntsville.

“In 24 hours it’s all gone,” said Steve Hammer, pharmacy buyer.

Last week, an epidemiologist at UW-Madison wrote a candid guide for understanding COVID-19. Her post has been shared more than 75,000 times and we asked her what she thinks about this phenomenon.

“Stocking up, hoarding toilet paper, and gloves, and hand sanitizer, and masks so much that you would have enough for your whole family for 5 years is not only unnecessary, it’s not helpful,” said Malia Jones, Phd.

It’s not helpful for other people who also need hand sanitizer to help prevent the spread of COVID-19. Psychologists refer to this as ‘panic buying’, when people hoard items in an attempt to feel more in control of a situation.

Some of the effects of panic buying can be easy to see like when items like disinfecting wipes fly off the shelf, but there are others that may not be as easy for consumers to see right away.

Nic Loyd is UAH’s Director for Management and Economic Research. He drew a diagram to explain the ripple effect of panic buying on the nation’s supply chain, all the way from retailers to producers.

“Any little inflection of a demand from us, the customer, is known as the bullwhip effect, where that demand gets amplified throughout the supply chain in quantity and in terms of time,” Loyd explained.

He said when there is a spike in demand, it can result in delays, something stores are already seeing when it comes to hand sanitizer.

“I would say we’re still a month out from getting a good supply,” said Hammer.

“Panic buying causes those spikes, and those spikes cause delays to be longer because orders get put on backorder with the different entities,” Loyd said.

UAH says manufacturers can be reluctant to ramp up product amid panic buying because they don’t want to be caught with a surplus when heavy demand subsides. Giving a whole new meaning to buyer beware.