IPC Chief Economist Dr. Shawn DuBravac Shares Industry's Financial Outlook

Estimated reading time: 15 minutes

And so the transportation network starts to get inhibited to some degree. About half of their freight is carried by passenger flight. So as passenger flights have been canceled out, that has taken a lot of air freight offline. And so companies have had to find other freight options and other things that they could do in place of that now. We are starting to see American Airlines, Delta, and others announce that they’ll be running cargo-only flights. So that should help some of the air freight situation that we’ve seen over the last couple of weeks. But those are all the things that companies will have to be dealing with probably at least for the next two or three months.

Matties: Overall, you’ve mentioned supply chains and shipping and all sorts of aspects around that. What do you think the long-term impact will be? What lessons have we learned?

DuBravac: Well, I think every time we have an event like this, it tests the resiliency of the supply chain. And so in many ways, this is what the supply chain is designed to do, is to respond to shocks somewhere in the system, and to make adjustments in the supply chain within that system so that consumers and businesses that are at the far end of that don’t feel that. And I would argue that the supply chains have done a pretty good job, at least from what I can tell, thus far, at doing that. We had a major supply disruption when you had trying to go offline—essentially, the entire country go offline—from a consumption and a production standpoint for several weeks. And yet you didn’t see a lot of electronics manufacturers in Europe or North America also go offline as a result of not being able to secure the right inputs and components and supplies that they needed to continue to produce. So they were able to adjust to those shocks.

Now, obviously, that’s probably not true in all cases, in absolute cases, but the large number of companies that I spoke with were able to adjust to the shock that they saw and make other arrangements and look for alternative sourcing and alternative productions. And you haven’t seen consumers talking about, or businesses talking about the inability to get certain products. Definitely, you have seen certain orders delayed as it relates to consumer electronics. I know that a certain, and primarily it’s in the consumer electronic space, smartphones and laptop configurations were impacted, but by and large, you haven’t seen entire classes of categories impacted.

Matties: Very good. To close, Shawn, what sort of advice would you offer the industry at this point?

DuBravac: Well, I think the advice I would offer is to remain resilient. Manufacturers should continue to stay online. Obviously, following all of the direction that we’re being given by the CDC here in North America and other similar agencies more broadly. Look to make adjustments within your manufacturing processes if you can, in order to abide by these guidelines. But continue to be resilient. I’ve been very impressed with the companies that I’ve spoken with and the resiliency that they’ve shown to address the issues that they’re confronted with and to make adjustments. And so continue to make those adjustments. Communication flow is extremely important in these types of periods.

So not only should you be communicating with your financial institutions, banks, and lenders, but you should also be communicating up and down the supply chain as frequently as possible with the most accurate information as possible. I think one of the things we always find in these events is that accurate information tends to be highly correlated with current information and the frequency of information. And we always want the most up-to-date information that we can get during these types of periods. So continue to share that information, it’s very important. And that’s really, I think, one of the overarching goals of trade associations during these periods, companies or groups like IPC is to disseminate that information quickly to membership to ensure that members are working off of the same information and the most accurate information that’s available at that time.

Matties: Well, Shawn, we certainly appreciate your time today, and your expertise, and we’ll look forward to some future updates with you. Thank you very much.

DuBravac: Great. Thanks.

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