Covid-19 Vaccine Availability: Supply Chain Bullwhip Effect

Originally posted Dec 12, 2020 9:11 PM

Updated December 12, 2020 11:23 p.m.

Will there be enough doses of the Covid-19 vaccine available in time for our 2021 travel plans? Now that the coronavirus vaccine is approved and ready for release, we know that FedEx and UPS are working together to facilitate rapid distribution to all 50 states (the cooperation is pretty straightforward, they’ve split the country in half). The question on everyone’s mind …

When can I get vaccinated against Covid-19? Late spring 2021 seems like the best guess for most Americans. Some high-risk groups are the first to receive early shipments, such as medical workers and the elderly. For the rest of us, the initial wave of doses will likely be very difficult to achieve (similar to getting test kits in early April / May).

The Bullwhip effect

Don’t be afraid, however. We are confident that the classic supply chain bullwhip effect will come into effect here.

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The bullwhip effect of the supply chain, S. Kuttappa

Every first year MBA student learns a few basic concepts and frameworks in operations research. One is the infamous network effect, which is why sites such as Craigslist, the NYC RentHop rental site, the condo and co-op site RealtyHop, and recently Airbnb has built a ditch that protects their business. In these two-sided markets, the value of the service is minimal when there are very few users, but continues to expand as more and more users join the service.

The Bullwhip effect is another classic. Even a small shock to customer demand can quickly lead to overproduction, as each player in the complex supply chain tries to adapt to the new demand. Even with all of today’s technology, communication in the supply chain has a natural mismatch between the different players, and the individual motivations of each compound the problem.

Producers, distributors and retailers face a problem in meeting demand and tend to over-order to avoid future stockouts. However, the latency between getting production or shipments from each upstream supplier means that new supply will arrive late. Therefore, each player compensates by getting even more buffer to make sure they have enough supply. When the supply finally arrives, everyone will find that they have ordered too much!

It is almost inevitable and has been repeated throughout history. In the first few months, it will be almost impossible for you to receive a dose of the vaccine. However, with a little patience, we can trust the bullwhip effect to saturate the market with oversupply. By mid-2021, the coronavirus vaccine should be extremely easy to obtain, for those who want it. The big challenge will be to convince everyone to take it up, so that we can all finally return to the new normal. Until then, stay safe!

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