Global economy facing significant supply shock from coronavirus

But to be clear if a supply shock does indeed come to fruition then software and what not are certainly not exempt from reduced profitability.

Piggybacking on this, due to the interconnections of our economy a supply shock can cause ripple effects through multiple companies and industries that-- on the surface-- don't seem directly related.

This is a real-life example I'm watching play out in front of me, but its mechanics, if a manufacturing company is unable to source a critical component (like a bolt) due to a Chinese factory halting production, they have to scramble to replace that source or make up the shortfall themselves. This takes time even for the fastest companies.Meanwhile, inventories drop, the sales campaigns that were originally planned have to be suspended, and the sales rep at a printing company is calling wanting to know why the normal order of flyers have been canceled. Digital marketing ad spend has to stop to prevent excessive backorders. The company is now spending twice as much on the bolts from the new source because everyone wants that bolt and they can't keep up with production.

/r/econmonitor Thread Parent