The Post-Pandemic Supply Chain Shortage
April 12, 2022
Disruptions to supply chains can create chaos that negatively impacts the price and availability of a good or service — an impact that, unfortunately, can be felt by consumers. The supply chain shortage that emerged during the COVID-19 pandemic has shown what can happen when supply chains are broken. It has also presented a unique opportunity for businesses all over the world to examine their supply chains’ vulnerabilities to better prepare for future disruptions.
To learn more, check out the infographic below, created by Athens State University’s Master of Science in Global Logistics and Supply Chain Management program.
The Current Supply Chain Shortage by the Numbers
Bottlenecks in the supply chain have caused a crisis leading to empty shelves and frustrated consumers. As the pandemic evolves and moves toward its eventual conclusion, the concept of supply and demand is being tested like never before.
Supply chain disruptions rose 638% in the first half of 2021 compared with the first half of 2020. Factory fires were a notable disruption, as they increased 150% during this time. North America accounted for 46.5% of these disruptive events, followed by Europe (23.43%) and Asia (19.45%).
Delays in shipping were dramatic enough to dominate supply chain news during the pandemic. In September 2021, 65 container ships were anchored off the California coast, waiting for their turn to dock at either the Port of Los Angeles or the Port of Long Beach. The next month, nearly 500,000 shipping containers were waiting to be unloaded at the Port of Los Angeles, the largest American port. These containers collectively carried roughly 12 million metric tons of goods.
Supply Chain Disruptions’ Impact on Businesses and Industries
During the week of July 12, 2021, 38.8% of U.S. small businesses experienced domestic supplier delays. Supply chain disruptions impacted small businesses across many sectors, including manufacturing business (64.6%), retail businesses (59.8%), construction businesses (58.5%), and accommodation and food services businesses (51.4%). Due to these delays, 17.7% of U.S. small businesses stated they would need to identify new supply chain options within the next six months.
Supply chain delays also negatively impacted the economy. U.S. gross domestic product in the third quarter of 2021 grew at a rate of 2% — slower than the projected 2.8% growth. Additionally, consumer prices in December 2021 were 7% higher than in December 2020, marking the highest 12-month increase since June 1982. Key contributors to this increase included price hikes for food, shelter, and vehicles.
What’s Causing the Supply Chain Shortage?
A supply chain consists of many parts. As such, the supply chain shortage is the result of numerous factors.
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Reasons for the Supply Chain Shortage
One of the primary reasons for the supply chain shortage relates to the COVID-19 pandemic. Port terminal shutterings and lockdowns to contain the spread of the virus have caused disruption, and economic uncertainty has halted investments in supply chain improvements.
Another issue concerns the lack of essential employees, including truckers, warehouse workers, port workers, and skilled management. Other issues include a shortage of equipment and space, peripherally caused by COVID-19, an increase in consumer demand, and inadequate infrastructure.
When Will the Supply Chain Crisis End?
Estimates suggest the supply chain crisis may not be resolved for a substantial time period. Some industry experts predict it may begin to ease in the second half of 2022, while others predict it may persist until 2023.
Building a Better Supply Chain
While the supply chain crisis has caused widespread disruption, it’s provided businesses with lessons they can use to improve their supply chains in the future. These lessons can potentially lead to a more efficient, effective, and resilient supply chain in the post-pandemic environment.
Ways to Improve the Supply Chain
There are several ways businesses can make their supply chains better. One way is to uncover hidden supply chain risks and then take action to mitigate them, such as by avoiding relying on a single source and ensuring arrangements are flexible enough to integrate the latest technology. Another tactic requires identifying vulnerabilities by analyzing each link in the supply chain for potential disruption or creating solutions that improve links without creating vulnerabilities in other parts of the supply chain.
A third strategy involves diversifying the supply base by sourcing supplies from more than one country, weighing the potential political implications of a country, and adapting a regional approach to sourcing international goods and services. Additionally, businesses can partake in holding intermediate inventory, or “safety stock,” by building a surplus of supplies in case a disruption occurs, but they also need to be mindful of the potential risk of obsolescence. Finally, they can integrate new technologies, such as automation, new processing technologies, continuous-flow manufacturing, or additive manufacturing.
Planning for the Future
The current supply chain crisis will eventually pass. In the meantime, businesses need to begin planning for the end of the crisis, whenever it may come. By devising and adopting strategies to strengthen the supply chain process, businesses can take action to shield their supply chains from future disruptions.
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