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Disruptions in supply chain will not improve soon

Experts predict disruptions in supply chain will not improve soon

By Edward Saenz

Over the past year, the shortage of assorted items has become apparent, everything from computers to car parts, lumber, even cereal. Across the world, tons of products are in short supply, and experts predict it will not be changing any time soon.

The global supply chain system is a massive machine, with millions of moving parts, and if any minor damage were to happen to one of those parts, it could derail the entire machine. What would happen if something were to damage all the parts? COVID-19 answered that question.

When the entire world went into lockdown in March 2020, it disrupted every aspect of the supply chain. Many factories where goods are made are located across Southeast Asia, all places that were heavily affected by the pandemic, and as such, had to go into various forms of lockdown. For example, Vietnam is still undergoing nationwide lockdowns.

It led to factories either closing or heavily limiting the number of workers on-site, causing fewer materials to be manufactured. In response to this, many shipping companies cut shipping schedules and laid-off workers in anticipation of the slowdown in goods from those countries.

Just because the number of supplies being created diminished, it did not mean the demand for such supplies did. If anything, the demand for products only increased when lockdowns started. The immediate push to work from home had people out buying new laptops and all the fixings for them. The rise in gear purchases such as webcams and microphones caused massive shortages in the tech industry. With restaurants closing or moving to limited schedules, cooking at home became a necessity. Suddenly families needed way more kitchen equipment than ever. This chaos caused a massive chain reaction throughout the system.

Factories for these types of products are not a one-stop-shop of all parts. A computer, for example, will be assembled in China, but the CPU chip is made in Taiwan, and the monitor panel is made in South Korea. Other, more specialized parts, may even come from Europe or North America.

Coupled with the supply shortages on the items already creating a problem, a major shortage of shipping containers only served to make things even worse. A little-known fact about supply shipping containers: they are designed to be used only once. As a final effort to save the supply chain, China began asking that the containers be reused, but many were forgotten or lost.

During the first wave of the pandemic, China was mass-producing protective medical gear with the intent to ship them across the world. This tactic led to China not only sending more shipping containers than ever, but also to places they have never sent them to. West Africa and South Asia became hot spots. The lack of shipping containers caused shipping prices to skyrocket. Before the pandemic, shipping a container from Shanghai to Los Angeles would cost about $2000. In 2021, the price far exceeds $25,000.

For the ships that did manage to make the journey, the employee shortage going on in the U.S. caused the docks to become overwhelmed with ships, causing further delays getting things onto delivery trucks. In the U.S., the vast majority of supply chain travel is done via truck drivers, many of whom were laid off in early 2020 due to the lack of work.

As if all this were not bad enough, the Suez Canal was blocked off by the EverGreen ship in March 2021, which caused even more delays. The Suez Canal is one of the most important global trade routes, as it allows the most efficient way to get goods from Asia to Western Europe and the Americas. The month-long blockage delayed over 450 ships.

The issue with the supply chain far exceeds one country and just one problem, according to Adjunct Professor of Operations Management Nicole DeHoratius, at the University of Chicago. She believes that if only one or two problems had occurred, we might have been able to survive, “but it’s the fact that all these challenges are happening at the same time.”

The supply shortage issues will not be fixed by the end of this year, and maybe not even next year, according to experts. This is going to be a slow yet gradual repair.

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Last updated 11/19/2021 6:41 AM