Economy / Labor Force / Politics

The Supply Chain Crisis Extends Far and Wide 

Executive Summary 

  • Failures in the supply chain can be detected along virtually every aspect of the process; some existed before COVID-19, while others were caused by the pandemic. 
  • It is unclear how long these problems will persist; especially as demand increases through the holiday season. 
  • The United States Department of Transportation attempted to address these issues by expanding the capacity and efficiency of the ports but they also should focus on addressing the labor shortage in the trucking industry.  

Introduction 

During the past 18 months, the American public experienced an unprecedented number of product shortages. Beginning in April 2020 with widespread stockpiling of goods caused by panic related to COVID-19, we are now faced with more empty shelves and increased prices. Unfortunately, failures in both the American and international supply chains can be detected in almost every aspect of the process. There are large-scale issues like low container supply, backed-up shipping routes, and inadequate port functionality, but there are also localized issues like the understaffed trucking industry and empty fulfillment centers. All these elements are so deeply intertwined that they exponentially perpetuate one another.  

Why did it get so bad? 

While some of the supply chain issues arose before COVID-19 even existed, the extent and duration of these struggles are made apparent by a combination of many factors both new and old. Of course, the economic uncertainty and stall of the markets, caused by safety measures concerning the COVID-19 pandemic, stifled financial growth for a large portion of the past two years. The turbulent back and forth between high demand and low demand broke supply networks and removed stability from the market.  

The shipping industry faces unprecedented hurdles as prices for certain shipping routes spike and record numbers of cargo ships sit for days outside of ports. Chinese ports are upended as bad weather and fluctuations in demand cripple their ability to efficiently export products. Meanwhile, American ports are setting new records for imports and exporting the lowest amount since 2005. The Port of Long Beach and the Port of Los Angeles are bursting at the seams with the amounts of products that are being imported as their capacity and infrastructure fails to keep up. 

The worldwide labor shortage also deeply impacts the efficiency of the supply chain. This is especially true for the trucking industry which recently experienced a mass exodus. Some reasons for this are the increased unemployment benefits from the past year along with the need to take care of children who are home from school because of COVID-19. Another reason is that the baby boomer generation is beginning to phase out of the workforce, which is projected to cause a 60-million-person turnover by 2025. It is reported that there is one qualified truck driver for every nine job openings. We have seen that even if the products are available if no one is able to reliably move them it is equally problematic. 

How long will it take to recover? 

In June the Biden Administration described these disruptions as “transitory”, but it seems that they will continue to weigh on the American people and the global economy for the foreseeable future, and even. Secretary of Transportation Pete Buttigieg has suggested that these issues could persist into 2022.  

Much of the supply chain news coverage now concerns the impact shipping delays will have on the upcoming Holiday season. The reality is that we have had few (if any) supply chain failures of this magnitude, so it is unclear how long it will take to correct.  

How can we prevent this in the future? 

The Biden Administration encouraged the expansion of the capacity of ports, in an effort to ease the backlog of ships. The Port of Long Beach and the Port of Los Angeles opened some of its terminals for longer hours and hope to be able to increase operating hours to 24/7. Expanding these hours will help, but according to Forbes, production in the Port of Los Angeles increased by 50 percent compared to pre-pandemic levels, and it is still not enough. 

One of the most tangible ways to improve the efficiency of supply chains is to focus our efforts on the driver shortage. Many trucking companies have instituted benefits to entice new workers, including signing bonuses up to 12 thousand dollars and salaries over 80 thousand a year. Increasing the supply of drivers will help reduce stalling in ports, make more space for new goods to be dropped and relieve the traffic jams in shipping routes. 

Conclusion 

It is evident that the weaknesses displayed by our supply chain are exacerbated by a perfect storm of financial volatility, worker shortages, and an economy that is desperate to recover. The antidote lies in a multifaceted response to each of these issues that prioritizes workers to run shipping and processing. Unfortunately, the deeply rooted failures in our supply chain will take months, if not longer, to repair. In response, we should reevaluate our supply networks and attempt to address the gaps that are evident in a post-COVID era. 

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