Responding to epidemic-driven demand: the role of supply channels

Abstract

ABSTRACT Matching the supply of medical equipment with soaring demand caused by an epidemic event is a daunting challenge. Focusing on medical equipment manufacturers, this study empirically examines how supply chain management impacts manufacturers’ responses to epidemic-driven demand. This study employs novel supply chain data from South Korea collected before and after the MERS (Middle East Respiratory Syndrome) epidemic event. In the results, we show that such an epidemic positively influences the sales performance of medical equipment manufacturers (i.e. a 10.2 percentage-point increase). To identify the mechanism behind this result, we provide evidence that increasing the supply base (i.e. the number of supply channels) enables medical equipment manufacturers to better respond to epidemic-driven demand and ultimately improves their sales performance. More interestingly, we find that medical equipment manufacturers with lower market status (i.e. lower market shares and lower supplier shares) expand their supply bases more extensively than other medical equipment manufacturers with higher market status do. Interpreting these results, we offer managerial insights into how medical equipment manufacturers can effectively manage their supply chains and improve their performance when responding to epidemic-driven demand.