INSIGHTS

The coronavirus creates multiple dilemmas for businesses

March 12, 2020 | News

“There’s a paradox here,” said MBX’s Justin Formella. “If it seems like an overreaction after the fact, it means you probably did the right thing and helped the situation improve.”

For Chicago business, the coronavirus at first seemed like distant shells from a hostile army still far from its target.

Manufacturers reliant on Far East supply chains felt the first reverberations in January. Life went on for other companies, albeit with more hand sanitizer. But all that changed in Chicago this week, when the coronavirus invasion stormed the city’s psychological gates.

Conventions scheduled for McCormick Place began getting canceled, especially those drawing attendance from overseas or from West Coast cities hit earlier by COVID-19. That hammered hotels, airlines, restaurants and contractors tied to tourism. By week’s end, canceling other large business meetings appeared to be the rule and not the exception.

Led by major Chicago employers such as Google and McDonald’s, more businesses are telling office workers to log in from home if possible. Companies sent out statements attesting to stepped-up attention to cleanliness. Airlines detailed service cuts extending into the summer.

Michael Jacobson, CEO of the Illinois Hotel & Lodging Association, said in a downtown market of about 50,000 hotel rooms, more than 130,000 room nights have been lost due to organizers trying to prevent the virus’ spread. “You have hotels seeing a 60-70% plummeting in their occupancy,” he said. “If this continues, they’ll have no choice but to make difficult decisions about staffing.”

The upcoming weekend, with the St. Patrick’s Day parade and a large housewares convention, was expected to be hectic. But the events are canceled. “Many hotels were expected to be 100% occupied. Now you’re talking about 25%,” he said.

At Chicago business consultancy Slalom, the reaction included “recently converting all company meetings of more than 35 attendees to be virtual meetings and postponing those meetings when virtual is not possible,” chief of staff Amber Heinrich said.

Rob Karr, CEO of the Illinois Retail Merchants Association, said the impact of the virus is working its way along an economic chain, starting with industries, advancing to travel and tourism, and now involving office workers, retailers and other sectors close to daily life. Stores have had a run on basic supplies from people thinking they will hunker down, Karr said.

“But what happens if public transit shuts down and people can’t get to work?” he said. “If there are limits placed on crowd sizes, how does that affect a large grocery store or a big box retailer that might have 120 employees?”

Checking ahead of time on a facility being open became wise, whatever its size. The Chicago futures markets will close its Jackson Boulevard trading floor at the close of business Friday and study when it’s safe to reopen. Traders in the meantime can work their strategies online, as most already do.

And of all places, the normally sedate National Archives Center for the federal government on the city’s Southwest Side is closed because of virus exposure.

However, one manufacturer on the front lines of the crisis is seeing potential good news. Justin Formella, chief strategy officer at Libertyville-based MBX Systems, noted South Korea is seeing a decline in COVID-19 cases and some suppliers in China that had been shut down are back to 90% capacity.

“I believe there will be a turning point here soon,” Formella said. The 180-employee company produces custom computing hardware and software for a range of end users. But he still has concerns about the demand side.

Some customers stocked up in expectation of a supply cutoff, and MBX attends several trade shows each year, some of which may be canceled. “These shows are a big part of the sales cycle,” Formella said.

Because manufacturers can’t just tell employees to work from home, Formella said MBX has evaluated its minimum staffing levels, increased cross-training and advised workers to stay home when sick. He said the nonunion company has increased its annual paid sick days per worker to 15 from 10.

Other employers are being reminded about the Chicago ordinance that requires workers get at least five paid sick days per year.

That can be an issue at local eateries, where employee benefits can be less generous. “It’s a challenging time,” said Sam Toia, CEO of the Illinois Restaurant Association. He said his downtown members are seeing a decline in lunch business because of the work-at-home factor, but food delivery orders are up and some neighborhood places are reporting an uptick in business.

Asked about layoffs, Toia said, “We’re not at that point.” Still, the cancellation of professional sports looms as a threat to restaurateurs.

Is there a general overreaction to the virus? Consider Pepsico, which shut its downtown office building for 24 hours Wednesday to scrub it down. An internal message to employees provided to the Sun-Times attributed the decision to a family member of a staffer having worked in a location with a diagnosed case of coronavirus. Building staff told a Sun-Times photographer that it was open Thursday. A company spokesman could not be reached.

Many contend businesses should err on the side of caution, however. “There’s a paradox here,” said MBX’s Formella. “If it seems like an overreaction after the fact, it means you probably did the right thing and helped the situation improve.”

A store in a library

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The MBX Systems manufacturing floor in Libertyville. The company has seen its supply chain issues improve but may face lower demand due to the coronavirus. MBX Systems

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