Where Does the Supply Chain Crisis Stand Now?
There are signs that the tide could turn, even if challenges remain in some sectors. Supply Chain Shortages
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A year ago, few people outside of the shipping or manufacturing industries had ever heard of the term supply chain.
But now “supply chain issues” are at the forefront of most investors’ vocabulary, and when it comes to the inflation outlook, supply chains are seen as one of the key factors that will help determine how price pressures from 40-year highs can be lifted quickly.
There was hope that supply chain issues would ease in the first half of 2022 as the impact of the pandemic was contained in more countries. But other events, such as the war in Ukraine, have added new bottlenecks. And with closures in Shanghai and other key cities in China, pandemic-related issues are once again affecting supply chains.
Supply Chain Shortages – Global supply chain crisis 2021-2022
In 2021, global supply chains and shipments slowed as a result of the COVID-19 pandemic, causing global shortages and affecting consumer behaviour. Reasons for the economic slowdown included COVID-19 illnesses among workers and mandates and restrictions affecting staff availability. In freight transport, the goods remained in the port due to a shortage of personnel.
The associated global chip shortage has contributed to the supply chain crisis, particularly in the automotive and electronics sectors. During the 2021 holiday season, a surge in spending in North America, coupled with the spread of the Omicron variant of COVID-19, further exacerbated already tight supplies.
In early 2020, the COVID-19 pandemic initially slowed the global supply chain as manufacturers halted operations until safety precautions were taken. Despite optimistic business forecasts for the coming year, global trade continued at a reduced capacity and failed to fully recover. New challenges in 2021, including the Delta variant and limited access to the COVID-19 vaccine in developing countries, further exacerbated the global manufacturing recovery, even as the economies of richer, more vaccinated regions like the United States and Europe resumed consumption patterns.
Vietnam, for example, is a major supplier of American clothing. The country weathered the 2020 pandemic with a strict lockdown procedure, but the 2021 outbreaks forced many manufacturers to close, especially as workers remained largely unvaccinated. To sustain production in 2021, the Vietnamese government required workers in the highest-risk regions to live at their workplaces.
By mid-2021, major US ports were inundated with record amounts of incoming cargo. Terminal staff lacked the bandwidth to handle cargo, resulting in longer wait times. Container ships began to stay off ports for days or weeks. That surge spread inland as rail and truck services struggled under mounting strain coupled with labour shortages. The US trucking industry already had a driver shortage before the pandemic, with high turnover and below-average wages. While there are enough shipping containers to meet global demand, containers have become scarce given the amount that is held up in transit or misplaced in the wrong places in the supply chain. Furthermore, half of the seafarers come from developing countries with insufficient vaccination.
Major US retailers have chartered container ships in anticipation of the holiday season. Container shipping companies have been encouraged to develop and innovate technology-driven processes in shipping to achieve externally influenced free shipping.
On October 17, 2021, US Transportation Secretary Pete Buttigieg predicted that the crisis would “certainly” extend into 2022. In November, China’s Commerce Minister advised citizens to stockpile food for the winter.
In December 2021, CEOs of major automakers and electronics manufacturers said they expected semiconductor chip shortages to persist in the first half of 2022. Sales in India fell about 20 per cent in 2021 due to the shortage of chips and the number of light vehicles. Shortage losses amounted to half a million vehicles.
In February 2022, Peter S. Goodman argu in The New York Times that a return to the global supply chain before the COVID-19 pandemic in 2022 consider “unlikely”.
India, the United States and Brazil are the most affected in the supply chain, as there are significant shortages in many different product categories. Supply chain disruptions have proven particularly difficult to overcome and control, putting the country at a disadvantage in global trade. Regions, where democracy or human rights are in question, are particularly affect by the loss. Like India, China was one of the losers in the supply chain battle.
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