A cascade of events has created a worldwide calamity in the access and shipment of goods as we collectively grapple with a supply chain containing several broken links. A survey from fall 2021 stated that 91% of shoppers consider the supply chain before deciding on a purchase. Pollock Orora brings you the rundown of where the links have broken and a tenuous timeframe on when these links could be melded once more.

Economic Practices

Since the 1970s, good economic practices stress that businesses maintain low, just-in-time inventory levels. This keeps overhead down, and with new models of phones, fashions, and vehicles arriving every few months, it makes sense to have a ready line of goods at your disposal without actually housing them in your inventory.

Likewise, a majority of distributors practice on-demand production of those goods without wasting resources on products that will not be readily sold.

With these two low-inventory models, the amount of coordination between buyers, sellers, manufacturers, and shippers is extremely tricky.

Trucking

For the past 25 years, the trucking industry has been sliding deeper and deeper into challenges. Driver turnover is 94% in larger trucking organizations and slightly more than 79% for smaller companies. Drivers cite infrastructure inadequacies, dropping wages, labor shortages (80,000 unfilled positions as of 2021), and dismal job quality. Considering 70% of domestic goods are shipped via long-haul trucks, the sheer lack of skilled drivers has caused many end-use shelves to be bare of necessary items.

Keep in mind that semi-trucks carry goods intended for freight trains and transport boats as well. Lack of drivers for semis keeps trains in stations and boats in port awaiting full capacity, which delays goods reaching their final destination.

Global Pandemic

One of the links is the COVID-19 pandemic. Without manufacturers, packagers, shippers, and retail establishments, the ability for an average shopper to receive merchandise drops significantly. The initial reaction was to tighten our proverbial belts and wait a few weeks for the first miserable wave of COVID-19 to pass. Once humanity understood lockdown would be longer term, massive amounts of toiletries and electronics were suddenly in high demand with a fraction of the workforce available to deliver.

As restrictions waned, many businesses brought back their co-workers, causing another upheaval as the demand for supplies went from zero to fully stocked in a matter of weeks.

The Great Resignation

In August 2021, co-workers spoke with actions rather than words when 4.3 million Americans resigned. In the warehouse industry, supplying giant brick-and-mortar enterprises as well as online empires, more than 490,000 jobs were available in July 2021. Many of these co-workers were frustrated with low wages, being overworked, and feeling underappreciated. With warehouses empty and hardly anyone driving semi trucks, the supply chain seemed more like several individual broken links rather than a chain.

Major enterprises are enticing co-workers with higher wages, the promise of free college tuition, and a hiring package slightly greater than their competitors’.

Shipping Containers

Ports around the globe are receiving thousands of large shipping containers – the cargo containers of semi trucks and train cars – with no manpower to drive the vehicles to remove those goods from port. This backlog has caused a huge demand for cargo containers for manufacturers to ship goods worldwide, but with the containers bogged in ports and no method for shipping, goods remain in manufacturing facilities or in warehouses.

Political Unrest

Wars cut off supply chains as one country bars the shipment and receipt of goods from another country. The push for globalization has created a strong reliance and interconnected web of worldwide economies. If one or more countries no longer supplies an integral component of a necessary item, the entire market can come crashing down.

Governments and businesses are working to correct many of the issues leading to supply chain breakdown. Economists vary on their estimates of when supplies will meet demand; some believe 4-6 months while others think it will be several more years. Since so many of the links are interconnected, a small degree of change could ease shortages quickly or bog down the process significantly.

You can rely on Pollock Orora to bring you the latest information on global business and how it impacts you.