Coles facing supply chain challenges due to coronavirus crisis

Supermarket giant Coles has expressed concerns over stock and equipment delivery delays from china that could impact its supply chain transformation.

Shipping times from China have been uncertain for Australian retailers due to the global health crisis, coronavirus, stemming from the epicentre of the disease in Wuhan, China.

A Coles spokesperson said the company has experienced delays in refrigeration equipment being shipped out of China for its store renewals, including new smart fridges.

It isn’t confirmed if other automation equipment such as shuttle and conveyor belt technology used in the new distribution centres are also delayed due to shipping too.

Coles has invested close to a billion dollars across the next 5 years to install automated warehouses in Sydney and Brisbane.

A Coles spokesperson said logistics has remained challenging, especially through major ports in Shanghai and Tianjin in China due to the extension of Chinese New Year and coronavirus, which saw factories closed for longer than planned and delays in production due to staff requiring government permits to return to work.

“We are working with our suppliers and transport partners to manage our response to the Coronavirus and minimise the impact on product availability for customers,” she said.

Products such as antibacterial handwashes and hand sanitiser products are already low in stock and there are shortages forecast for non-food items like stationery, clothing, electrical goods. 

“We are keeping in close contact with affected suppliers, not just those in China but also local suppliers who source raw materials or packaging from China,” the spokesperson said.

 “Meat that Coles would usually sell to the Chinese market has been diverted to the other Asian countries that we export to, of which there are around forty.”

A report from Bloomberg revealed major Chinese ports are rejecting thousands of containers of frozen meat, causing a logistical nightmare.

Sources told Bloomberg that containers of frozen pork, chicken, and beef from Western Countries are piling up at Tianjin, Shanghai, and Ningbo ports because of the lack of truck drivers and many transportation networks remain closed.

Many vessels have been rerouted to other destinations because Seaports in China are quickly running out of room to house the containers and cannot provide enough electricity points to keep existing containers cold.

Two-thirds of the Chinese economy has effectively shut down much of its production capacity, producing a massive “demand shock” and causing product shortages to Western countries by approximately 60-90 days.

The Chinese economy constitutes about 20% of global GDP. Experts predict that China’s economy is at a standstill and could trigger the next economic crisis, not seen since 2008. 

Daniel Zhang, Alibaba Group’s CEO and Richard Adkerson, freeport-McMoRan CEO have both said the supply chain disruption due to the outbreak of the deadly virus in China is a “real black swan event”.

Coles CEO Cain has publicly said that if the situation in China did not improve by the end of March the retailer would then need a “Plan B” in terms if its exports there and goods coming in.

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