The impact of the COVID-19 pandemic on industrial users presents unprecedented challenges including supply chain interruptions, transit bottlenecks and increased demand. As supply chain disruptors leave product stranded, and as demand shifts persist, companies need product storage, spurring the need for temporary warehouse space. At the same time, businesses that manufacture critical goods are ramping up throughput to meet increased demand for medical supplies and groceries.
On Wednesday, March 18, President Trump invoked the Defense Production Act (DPA) which allows the government to require businesses to prioritize contracts that are necessary for public safety or defense. It includes the ability to control the distribution of materials and goods, requisition property, force increased production of critical goods and control the provision of raw materials.
Below are observations on the potential impacts of COVID-19 and the DPA on the industrial and manufacturing sectors:
Medical Supply Industry: To prepare for the increase in medical needs, companies that manufacture medical devices and supplies (surgical masks, ventilators, hospital beds, etc.) will look to increase manufacturing capacity.
Consumer Packaged Goods: There is an overall increased need for packaged food, household cleaning products and self-care items. Consumer packaged goods producers will attempt to increase throughput to meet the new and record-level demand.
Cold Storage: Increased demand for cold storage space is likely, due to the shortage in refrigerated shipping containers and an increased need for food and grocery items. Whereas grocery stores are stocking up and storing product locally due to delayed supply chains with supply gaps.
Gasoline: Gasoline will likely go into surplus and require more storage than usual in the U.S., particularly with reduced commuting.
Manufacturing Production Delays: Manufacturing that involves assembly of parts that are produced in different geographies will likely need additional temporary storage due to out-of-sync production—production that has slowed or paused for components necessary to complete the entire product. Manufacturers may also need to adjust throughput of certain components so the production of other items can catch up.
Restaurant Supply Distributors: As restaurants close for dine-in customers, restaurant supply distributors will need to store excess product and evaluate incoming orders from suppliers.
The global pandemic is without a doubt affecting the industrial market as we know it. Cushman & Wakefield will continuously monitor the virus and its impact and provide frequent updates.
