CHAPEL HILL — The COVID-19 crisis is causing a lot of disruption.

The uptick: it will spawn new innovations with a permanent global impact, says UNC Kenan-Flagler Business School Professor Mahka Moeen. She will be discussing changes in supply and demand during this period as part of a weekly press briefing organized by UNC Kenan-Flagler Business School and its affiliated Kenan Institute of Private Enterprise on Tuesday.

WRAL TechWire recently had the chance to pose a few questions. Here’s what she had to say:

  • Obviously, we’re seeing a lot of disruption happening with COVID-19. Talk to us about the shortages to the supply chain, and what kind of innovation you see coming out of it.

I can see at least two different ways in which supply chains are being impacted. Let’s start with the one that many of us have observed in our local stores in the past few weeks. Toilet papers, hand sanitizers, and canned foods are hard to find. Aisle after aisle, you’ll see empty shelves. It seems as if something is wrong with the supply chain of any of these products, as a result of which stores are not able to restock their shelves.

Do we expect to see innovations to address such shortages? If we look at the root cause for these shortages, we will see that these are driven by temporary shocks. All residents of the RTP area have decided to shop the same item at the same time. They even tried to buy many more items, compared to what they would have bought under regular circumstances. Once the initial months of panic buying and hoarding is over, customers are unlikely to shop these items at the same rate. It is also possible that they’ll buy fewer toilet papers in the coming months, just because of the large stock that they have already bought. So, it is unlikely that we see enduring innovations in supply chains of these products, given their temporary nature.

UNC Kenan-Flagler Business School Professor Mahka Moeen

The second disruption, though, may warrant more innovations. This pertains to the shortages in PPE and medical equipment. Healthcare providers are among the true heroes and heroines in this crisis. In order for them to effectively and safely offer care, supply chains need to match the required number and quality of PPE, ventilators, and other medical equipment. Each of these products are pretty costly and time-consuming to produce, and additionally, involve several components that need to be sourced from different suppliers. In the past, manufacturers were used to serving a stable number of hospitals and healthcare facilities. Their existing supply chains were adequate in addressing that limited demand. They probably didn’t have large incentives to innovate and make modifications to their existing mode of business. The COVID-19 crisis has increased the demand for the medical equipment extensively, and created the need to produce more products faster and cheaper.

This demand is likely to last for the foreseeable future, and there is a social urgency to addressing it. So, many manufacturers may start searching for innovative solutions to solve these shortages. What I want to emphasize is that to achieve scalable production, it is not enough for some manufacturers to simply expand the size of their plant and hire more employees. By contrast, solutions largely come from innovations in the existing supply chains. Some firms may replace bottleneck components with more accessible and cheaper ones. Others may incorporate rapid automation or additive manufacturing. Others may repurpose prototypes and models of other related products. The outcome of these innovations may be solutions that permanently reduce the cost and time needed to produce PPE and medical equipment. Once the COVID-19 crisis is over, it is unlikely that manufacturers go back to their old way of doing business. These efficient innovations will likely stay with us.

  • What industries do you think will be most affected, and how?

When we look at life today, it is hard to find an industry that is not affected by this crisis. The economic ramifications are widespread. There a few industries that are positively affected, and even after the crisis, they may continue to see a positive impact. These are largely industries such as online education, online shopping, video conferencing, and home entertainment. With many innovative products and industries, customers are initially reluctant to purchase the products and try them. There is always a group of early adopters who want to own the new and cool gadget, but the majority of the population waits until those innovative products are tested and proven. They’ll wait for the products to become cheaper and widely accessible. The crisis and the accompanying social distancing guidelines have pushed this majority of late adopters to try new and innovative products that they would have never tried so early in the product life cycle.

If they like their new online and virtual experiences, this will be excellent for firms. They have gained a massive following. If these customers don’t like their online and virtual experience, it is still a meaningful information for firm. After the crisis, those firms don’t need to wait for the population majority to adopt their products one by one. They just know that they need to move on to the next innovation.