Exiting a COVID-19 Lockdown: The Bumpy Road Ahead for Many Supply Chains

Abstract

We extend our validated system dynamics models that we deployed 11 years ago during the credit crisis to model the production lockdown caused by the Covid-19 crisis. We estimate the supply chain dynamics that we may see unfold over the next few months. Our results suggest that inventory dynamics may be very large, caused by dramatic drops in demand. Regardless of how the market recovery will evolve, we demonstrate the criticality of monitoring cumulative supply chain inventory and market demand. For companies upstream in the supply chain, the impact of the inventory evolution is much stronger than the exact details of the market recovery. Our work and results are indicative, and definitive insights can only be obtained in hindsight. In view of the importance of sharing our insights, and given that our structural results are very robust to errors in market demand estimation, we have decided to write this paper now. We solicit your feedback; please do get in touch.