Product availability and stockpiling in times of pandemic: causes of supply chain disruptions and preventive measures in retailing.

Abstract

The coronavirus pandemic in 2020 brought global supply chain disruptions for retailers responding to the increased demand of consumers for popular merchandise. There is a need to adapt the existing supply chain models to describe the disruptions and offer the potential measures that businesses and governments can take to minimize adverse effects from a retail logistics perspective. This research analyses the possible reasons for supply and demand disruptions using a mathematical model of a retail supply chain with uncertain lead times and stochastic demand of strategic consumers. The established concepts of supply chain management are applied for the model analysis: multi-period inventory policies, bullwhip effect, and strategic consumers. The impact of the pandemic outbreaks in the model is two-fold: increased lead-time uncertainty affects supply, while consumer stockpiling affects demand. Consumers' rational hoarding and irrational panic buying significantly increase retailers' costs due to higher safety stock and demand variability. The bullwhip effect further exacerbates the disruption. The research contributes to the recent literature on business response to supply chain disruptions by developing a model where both retailers and consumers decide on the order quantity and reorder point during a pandemic outbreak. Buying limits, continuous inventory review, government rationing, substitutability, and omnichannel fulfillment are the measures that can limit the damage of supply chain disruptions from stockpiling during the pandemic. Effective communication and price and availability guarantees can mitigate the negative impact of panic buying.