It’s the second quarter of 2022, and the Global Supply Chain Crisis continues to buckle under the strain of the continuing pandemic, geopolitical conflict, and economic uncertainty. Shortages have defined the struggles of businesses during the last two years. Because of hoarding and panic buying, stores didn’t have enough inventory to put up on shelves. In addition, many retailers didn’t have the online infrastructure to transition digitally.
2021 brought along a different set of challenges. As eCommerce grew and more people shopped online, warehouses and shipping ports filled themselves with goods, causing significant delays due to congestion. Moreover, a shortage of semiconductor chips hit automotive makers and the electronics industry, especially hard since these chips serve as key materials for their production.
To summarize the situation, Damien Bruckard, deputy director of trade and investment at the International Chamber of Commerce in Paris, says. “The collapse and subsequent surge in consumer demand during the pandemic has led to significant shortages of manufacturing components, order backlogs, delivery delays and a spike in transportation costs and consumer prices.”
What is the state of the supply chain crisis in 2022? This article will outline some of the major causes of the problems in supply chains today and provide insights to avoid delays.
What Caused the Global Supply Chain Crisis?
In early 2020, many manufacturers put their operations on hold as a precaution against COVID-19. Much of the world still didn’t understand the nature and effects of the virus at the time. As a result, governments temporarily asked businesses to close in the interest of public safety. Here are some major events that contributed to the current crisis:
- As the COVID-19 virus infections exploded in China, many major manufacturing firms had to lock down a majority of their workforce. This shutdown of operations heavily affected the production of medicine, consumer goods, and electronics.
- Work-from-home arrangements and lockdowns increased demand for electronics, medical equipment, appliances, and building materials. Additionally, people were concerned about preparing themselves for the long haul against the virus.
- The dominance of the “lean manufacturing” model led to a chain reaction that left warehouses unable to keep up with a sudden demand for products.
world had been put on strict lockdowns and many companies chose to put their operations on hold. But as people received financial aid in the form of stimulus packages, and added savings from staying at home, they turned to online shopping instead. 2020 retail holiday sales actually grew by 8.3% in the U.S. despite the pandemic.
Lean manufacturing can be advantageous for many companies, focusing on minimizing waste leading to cost-efficiency and reduced lead times. However, market demands skyrocketed when the COVID-19 pandemic began. The lean approach wasn’t enough. It relied on highly accurate forecasting to adjust the shipping dates to deliver the right items when needed. This foresight prevents stocks and materials from spending extended time in storage.
The sudden changes in demand exposed flaws in many logistics operations. For example, businesses could not immediately acquire large stock due to staff shortages in warehouses and manufacturing. This delay would later cascade into logjams at major trading hubs and port cities, with massive backlogs in crowded shipyards.
Current State of the Global Supply Chain Crisis
Businesses initially tried to deal with disruptions to their supply chain by spending more to hire private container ships and stockpiling goods. However, these are more temporary solutions to the problem. As a result, other retailers have looked to overhaul how they approach logistics, prioritizing security.
Shipping companies saw immense growth in 2021. The cost of a 40ft container increased from $1,331 on average at the end of February 2020 to a peak of $11,109 by mid-September 2021.
The soaring shipping cost has highlighted the need to shorten supply chains and look for alternative ways to get products out to consumers.
Lisa Anderson, president of supply chain consultancy LMA Consulting Group, says: “[The rocketing container costs are] increasing the prices of goods because companies can’t just absorb these prices, and they are passing them on. It is causing this inflation that will continue as long as shipping prices are high.”
The global political and economic landscape has also affected Travis ci supply chain issues. Europe, in particular, has seen added cross-border checks and red tape due to Brexit. The ongoing Ukraine-Russia War is a significant factor in rising goods and transportation fees costs and continues to endanger many lives.
A severe shortage of semiconductors and chips has crippled the automotive and electronics industries as well. This shortage has affected the production of cars, coffee machines, computer components, and many more. As demand for items in these categories grew, production could not keep up due to a depleted supply. As a result, other manufacturers have resorted to hoarding chips, which has not helped the situation.
Staff shortages caused by the pandemic have also defined the current supply chain crisis. Lockdowns and layoffs have resulted in smaller workforces and a need for skilled workers. As a result, skilled laborers have moved away from city centers into rural areas— making hiring and recruitment even more challenging.
