Decoding the 'Lockdown' Supply Chain of High Demand and Perceived Scarcity

Bulk buying and hoarding of essentials has impacted the food and essentials supply chain, causing stress across the manufacturing vertical
Decoding the 'Lockdown' Supply Chain of High Demand and Perceived Scarcity
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Even as the Indian state and central government announce various steps to contain the COVID-19 pandemic in India through an extended lockdown, Indian households continue to battle the fear of scarcity and uncertainty over access to daily essentials. While the government has recently notified a list of sectors that can resume operations from April 20, including the flow of goods in the country across district and state borders, the perceived scarcity of essentials continues to plague those confined in their homes, in a bid to fight the infection. While people are following instructions such as social distancing, wearing masks, and sanitizing hands, etc., the frequent outpouring of people to liquor stores, grocery stores, and supermarkets has also presented a risk of spreading infection.

In addition to the risk of spreading infection, this bulk buying and hoarding due to perceived scarcity of essentials has also gravely impacted the food and essentials supply chain, causing stress across the manufacturing, FMCG and food supply chain across the country.  Let us break down this cause and effect and understand the impact.

Bulk buying and hoarding

For an average person who would purchase an X amount of grocery and stapes for a family of four, now ends of bulk buying and hoarding, purchasing up to 3X to 4X for every trip to the grocery store. This results in unavailability for other consumers, who also seek to purchase up to 2X to 3X times their regular consumption, in the bid to escape the fear of scarcity. With almost every consumer exhibiting similar 2-4 times enhanced consumption, the retail supply chain immediately comes under stress, to help match up the sudden increase in demand. It is important to note here that while the consumption seems to have increased, from the purchase patterns, in reality, the end-user is consuming the same amount as they did earlier. The only difference is in the hoarding of inventory.

Sluggish supply chain

The stress created due to the sudden rise in demand is further intensified with the slowing down of the supply chain, with lockdown restrictions that has made transportation slow and sporadic. Simultaneously, warehouses are also either stuck with a huge inventory, that is just sitting there, waiting to be transported, or is facing challenges with specialized storage for perishables and lack of manpower to manage the warehouses. In addition to the challenges in the movement of goods and build-up of inventory in warehouses, the logistics, and supply chain sector is also marred with a severe shortage of manpower, further resulting in delays, reduced supplies, and sporadic, inconsistent deliveries.

Impaired manufacturing

While the government has announced select manufacturing units to remain operational so as to ensure regular availability of FMCG and daily essential, the sudden rise in demand and the half capacity operations are contradictories that are throwing this balance off gear. While most manufacturers do have a backup inventory that can ensure uninterrupted supply for a shorter span, the extended lockdown, and the continuous hoarding and bulk buying, are only adding to the problem that has become a vicious cycle. 

Having said this, it is time to re-look at the consumption patterns, and, from an end consumer point of view, create awareness about conscious consumption. With the help of last-mile service providers such as LoveLocal, BigBasket, Scootsy, Swiggy, Dunzo, and Zomato, etc., the industry has been trying to create a more accessible and steady supply for essentials. But for the cycle to break, a vital question on consumption patterns needs to be addressed at the earliest.

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