2021–2022 global supply chain crisis

Global Container Freight Index
July 2019 - December 2021

In 2021, as a consequence of the COVID-19 pandemic, global supply chains and shipments slowed, causing worldwide shortages and affecting consumer patterns. Causes of the economic slowdown include workers becoming sick with COVID-19 as well as mandates and restrictions affecting the availability of staff. In cargo shipping goods remain at port - again due to staffing shortages. The related global chip shortage has continued to affect the supply chain crisis specifically as it relates to the automobile and electronics sector. During the Christmas and holiday season of 2021, an increased amount of economic spending in North America combined with the spread of the Omicron variant of COVID-19 further exacerbated the already backed up supply.

Causes

In early 2020, the COVID-19 pandemic initially slowed the global supply chain as manufacturers suspended work until safety precautions were enacted. Despite rosy forecasts from businesses for the next year, global trade continued at a reduced capacity and did not fully recover. New challenges in 2021, including the Delta variant and reduced access to the COVID-19 vaccine in developing countries, further exacerbated the recovery of global production even as wealthier, vaccinated economies, such as that of the United States and Europe, resumed their patterns of consumption.[1]

Vietnam, for example, is a major provider of American apparel. The country worked through the pandemic in 2020, with a strict lockdown procedure, but outbreaks in 2021 forced many manufacturers to close, especially as workers remained largely unvaccinated. To sustain production in 2021, the Vietnamese government required workers in higher-risk regions to live at their workplace.[1]

Economists pointed to lean manufacturing (also known as "just-in-time" manufacturing) as a major source of the supply chain disruption. The lean manufacturing method relies on well-tuned matching between the raw material input and finished good output of production facilities to minimize the amount of products stored in warehouses and thereby save money on overhead costs. It is notably weak to unexpected shifts in demand because it requires extremely accurate demand forecasting to achieve the savings and economies of scale that are its main benefits. When the COVID-19 pandemic began to shut down manufacturing facilities, it set off a chain reaction of disruption to the many companies which adopted lean principles in their production pipeline. Later, as demand skyrocketed for consumer goods and medical supplies like personal protective equipment (PPE), these same facilities were unable to keep up with demand, leading to massive backlogs. These disruptions cascaded into the global shipping industry where ports like the Port of Los Angeles, a major hub for imports from Asia, are unable to clear their shipyards in a timely fashion, further exacerbating the supply chain crisis. This has led to suggestions that stockpiles and diversification of suppliers should be more heavily focused.[2][3][4][5][6]

Shipping

By mid-2021, major American ports became inundated with historic amounts of inbound cargo. Terminal staff lacked the bandwidth to process the cargo, leading to extended wait times. Container ships began to stall outside ports for days or weeks. This surge spread inland as rail and trucking services struggled under the increased load alongside a labor shortage. The United States trucking industry was already short on drivers before the pandemic, with high turnover and subpar compensation. Though enough shipping containers exist to handle global needs, given the amount held in transit or misplaced in wrong parts of the supply chain, containers entered short supply. Additionally, half of the sailor population comes from developing, under-vaccinated countries.[1]

Effects

Large American retailers chartered container ships in early preparation for the holiday season.[1] Container shipping companies were encouraged to develop and innovate technology-driven processes in shipping to achieve external influence free shipping.[7]

On October 17, 2021, United States Secretary of Transportation Pete Buttigieg predicted that the crisis would "certainly" extend into 2022.[8] In November, the Chinese Minister of Commerce advised citizens to stock food supplies for the winter.[9][10]

According to a November 2021 report from Adobe Digital Insights, online shoppers were met with more than 2 billion out-of-stock messages in October 2021, which was double the rate reported in October 2020. In the United States the list of products that are in short supply included electronics, jewelry, clothing, pet supplies and home and garden items.[11]

Perspective

In December 2021 CEOs of major automotive manufacturers and electronics makers expected the shortage of semiconductor chips to continue through the first half of 2022. Sales in India fell approximately 20 percent in 2021 due to the shortage of chips and the amount of light vehicles lost to shortages was half a million vehicles.[12] As of February 2022, it was unlikely for 2022, perhaps for years.[13]

See also

References

  1. ^ a b c d Nguyen, Terry (September 2, 2021). "You can buy stuff online, but getting it is another story". Vox. Archived from the original on October 23, 2021. Retrieved October 17, 2021.
  2. ^ Dayan, David; Mabud, Rakeen (January 31, 2022). "How We Broke the Supply Chain". The American Prospect. Retrieved March 2, 2022.
  3. ^ "'Just-in-time' economy out of time as pandemic exposes fatal flaws". www.abc.net.au. May 1, 2020. Archived from the original on May 20, 2020. Retrieved May 21, 2020.
  4. ^ "Companies should shift from 'just in time' to 'just in case'". Financial Times. April 22, 2020. Archived from the original on May 4, 2020. Retrieved May 21, 2020.
  5. ^ Evans, Dave. "Coronavirus Shows That Supply Chains are Outdated and Unfit For Modern Manufacturing". Forbes. Archived from the original on July 22, 2020. Retrieved May 21, 2020.
  6. ^ Skidelky, Robert (April 22, 2020). "The coronavirus pandemic shows why the West must transform its economic logic". newstatesman. newstatesman. Archived from the original on June 2, 2021. Retrieved September 30, 2020.
  7. ^ Notteboom, Theo; Pallis, Thanos; Rodrigue, Jean-Paul (June 2021). "Disruptions and resilience in global container shipping and ports: the COVID-19 pandemic versus the 2008–2009 financial crisis". Maritime Economics & Logistics. 23 (2): 179–210. doi:10.1057/s41278-020-00180-5. ISSN 1479-2931. PMC 7781181.
  8. ^ Devan Cole and Jason Hoffman. "Buttigieg says US supply chain issues will 'certainly' continue into 2022". CNN. Archived from the original on October 23, 2021. Retrieved October 24, 2021.
  9. ^ "China is urging families to stock up on food as supply challenges multiply". CNN. November 2, 2021. Archived from the original on November 5, 2021.
  10. ^ Stevenson, Alexandra (November 2, 2021). "China urges families to stock up on food for winter months". New York Times. Archived from the original on November 5, 2021.
  11. ^ Layne, Rachel (November 10, 2021). "Electronics and jewelry top list of products in short supply, new data shows". CBS News. Archived from the original on November 18, 2021. Retrieved November 18, 2021.
  12. ^ Mukherjee, Writankar; Thakkar, Ketan (December 13, 2021). "Chips & parts shortage, logistics disruptions: Car, electronics woes may continue till June". The Economic Times. Archived from the original on December 14, 2021. Retrieved December 14, 2021.
  13. ^ Goodman, Peter S. (February 1, 2022). "A Normal Supply Chain? It's 'Unlikely' in 2022". The New York Times. ISSN 0362-4331. Retrieved February 2, 2022.

Further reading

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