The Supply Chain Crisis

How did we get here and what does our future look like?

Beginning in early 2021 and continuing to date (2022), shortages, extended lead times, and ships stuck in various harbors around the globe remain a serious problem. On the surface, it seems that this fracture in a once-stable industry was a result of covid infections and sick workers, but there seem to be other issues causing a, seemingly, never-ending supply chain crisis.

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Starting in the early throes of the pandemic, a reduction in workforces—in transportation, manufacturing, agriculture, and mining—was the initial catalyst to the supply chain crisis. Covid-19 infections caused many production and logistical industries to slow—or in some cases come to a screeching halt—leading eventually to increased scarcity in goods and materials. This scarcity only compounded the growing issue.

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Despite many of the manufacturing hubs around the world being hit the hardest by the pandemic and shipping companies reducing schedules (anticipating a drop in demand), demands for goods and materials only increased. As Americans emerged from quarantining, the money that they saved while sheltering in place was then spent, surging the demand for goods and services. Lumber, home appliances, gym equipment, microchips, and small electronics were in high demand, all while manufacturers and shipping companies operated on reduced staff. Despite some factories meeting the demands—and some producing more than average (which is common and done often around the holidays)—goods and products still could not get to where they needed to go.

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Shipping containers were in short supply, and the destination (start and finish) for shipping barges were getting stuck in places they weren’t normally. Early on in the pandemic, many of these barges were sent to regions such as South Asia and West Africa, carrying large amounts of PPE and medical equipment. When European and American demand skyrocketed, shipping containers rushed back to China, jamming their ports and shipyards, waiting to be filled, though not fast enough.

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Once products were loaded and sent to sea, a surprising number of containers fell into the ocean. Even after all of this, once arriving at the destination, this surge of ships overwhelmed dock availability. Los Angeles and Oakland made headlines, with ominous photos of massive freighters looming on the horizon. There was also the shutdown of the Suez Canal, where a container ship was stuck for 6 days, causing a backlog in some of the most pirated waters in the world, the Gulf of Aden.

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With all of this being said, and most of these events taking place in 2021, what happens next, and what does this say about the global supply chain? Under normal circumstances—if a global pandemic can ever be viewed as normal—public and private companies can respond to short-term risk, and the supply chain can adjust for a time. However, the Covid-19 pandemic has not been a short-term event (Covid-19 having its first outbreak in December of 2019), nor has the circumstances been anything near normal.

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There is a lot to be examined from this chain reaction of events. What might be the most concerning is the exposure of how a system, as large as the global supply chain, can collapse under the perfect storm of conditions. It’s speculated that the supply chain crisis could last into 2023 now, due to the power shortages in China and labor shortages amongst US shipyards and trucking/transportation industries. As new challenges arise, the squeeze on the global supply chain will only be exacerbated, meaning, no—this crisis is far from over. The only thing that can be guaranteed is that to find a solution and avoid future crises, experts will be required to reexamine the supply chain and consider how to fix the machine, rather than replace a few faulty parts.