Blog: Coronavirus outbreak highlights ongoing global sourcing uncertainty

The recent outbreak of coronavirus in Wuhan, China, which continues to spread even as you read this, was the only cloud marring the otherwise sunny disposition of attendees at last week’s Las Vegas Market.

Busy halls, active buying teams and what many described as larger than usual slates of new product had retailers and manufacturers in an optimistic mood.

But even as they basked in the glow of busy showrooms, furniture manufacturers were casting a cautious eye to the Far East, with many talking about postponing trips planned for after Chinese New Year and expressing concern that the spreading virus could impact the flow of goods out of China and Vietnam.

At this writing, the Chinese government had quarantined 50 million people across 17 cities and extended the Chinese New Year holiday in an effort to prevent the virus from spreading further. While the numbers change almost hourly, there have been nearly 6,000 confirmed cases reported worldwide and approximately 130 deaths, all thus far in China.

In addition to the human toll, there was growing concern within the furniture industry over the short-term impact on the flow of goods both from China and Vietnam as it seemed increasingly certain that a significant number of workers, who had gone home for the holiday, would be delayed from returning to their jobs by disease containment measures.

This comes at a time when the industry is already being challenged by the tariff-induced shift of manufacturing from China to Vietnam. While many companies opened new facilities or expanded existing ones, the shortage of trained workers (even before the virus outbreak) coupled with insufficient transportation infrastructure have resulted in shortages, delays and quality inconsistencies.

A number of retailers we’ve spoken with in recent months have expressed concern with the inability to get consistent quality and product flow, a situation that has put significant market share up for grabs as dealers seek greater certainty.

At the same time, rising costs in Vietnam have narrowed the original price advantage, causing some to reassess their options in China and others to continue scouring the globe in search of emerging sourcing alternatives. While manufacturing executives were unanimous in their confidence that these issues can be resolved in the longer term, the greatest challenge in the short-term is uncertainty.

Chinese New Year always results in some attrition of workers, but that number seems certain to rise this year in light of evolving events. And given the still emerging picture of the virus, its dangers, its means of transmission and the best means of containment, there is yet no clear picture of when workers will be able to return to the job. This casts uncertainty not only on delivery of existing orders, but also on the new product development cycle, with some expressing concern about  the ability to get timely samples for the spring High Point Market.

The only thing that seems certain at this point is that the first half of this year is likely to see disruptions to the flow of goods from China and Vietnam and that the search for new sources of supply is likely to continue.