The baby formula market exists as a shared monopoly, with only a few manufacturers controlling nearly all supply. Abbott had an approximately 43% market share a decade ago, according to a USDA report from 2011 the most recent number available. Little has changed since then. The company still maintains exclusive provider contracts in many states with WIC, the USDAs supplemental nutrition program for low-income families, which makes up nearly half of formula sales nationwide. A few other manufacturers, including Mead-Johnson and Nestl, also have WIC contracts and control the rest of the market. In addition to its highly concentrated structure, the baby formula market is difficult for another reason. Its demand is set by the nations birth rate, and the market has been shrinking for years. The number of births has declined every year since 2008, except for 2014, according to the U.S. Census Bureau. With only a few key players whose capacities are tied to a shrinking market, repercussions are inevitable when anything gets in the way of a certain product getting to store shelves. Other manufacturers are bound to struggle with an influx of new demand from consumers who cant get what theyd typically buy.
The dilemma [manufacturers] have is that it's not a very lucrative market, says Patrick Penfield, a professor of supply chain management at Syracuse University. The only way you can grow your market share is if youre aggressively going after competition. Because Abbott is one of the biggest players in the game already, significantly expanding its share is not really an option. If you can't grow your market share, then you look at how you can reduce costs, says Penfield. And sometimes when you reduce the costs, you may not have the right protocols or procedures in place to make sure that you're doing things properly. Im not saying that's what Abbott Laboratories did, he cautions. But that would be an assumption of mine.
tl;dr
one plant shutting down shouldn't cause a nationwide shortage except that the profit driven model of capitalism means neither the company with a monopoly on this or competitors kinda care to solve the issue.