The global supply chain crisis
Feb 14, 2022
A year after the coronavirus pandemic broke in 2020, it became clear that supply chain issues were not going away. Throughout 2021, bottlenecks and supply chain disruptions highlighted the fragility of infrastructures across the world. This fragility had existed pre-pandemic, but it was now undeniably strained under new pressures.
Of all the lockdowns, the first lockdown of 2020 will be the one most people remember for empty supermarket shelves and shortages of toilet paper as shoppers went on panic-buying sprees. Although this was tangible evidence of supply chain problems for the customer, retailers were aware that suppliers were feeling strained long before there was a scarcity of goods. As the pandemic continues, it’s apparent that this is not a temporary problem, and many other factors have combined to create the supply chain crisis.
Why have global supply chains been affected by the pandemic?
Global supply chains have been affected by:
- Raw material shortages
- Factory closures
- Worker shortages
- Port congestion
- High consumer demand
- Demand for shipping and air freight
Logistics and transport networks have not previously had to operate in the adverse conditions we’re experiencing across the world. There is now a strong need to reassess how those networks run and how efficient they are. As headlines before Christmas 2021 expressed fear of goods shortages before the holiday season, TIME magazine sought to debunk reports that there was a shortage of truck drivers. It seems the issue is a retention one, which has its roots in the deregulation of the industry in the 1980s.
Truck and lorry drivers across the world now have a lot less job security, either working on zero-hour contracts or as self-employed hauliers. There is also confusion over the network, with some claiming that there are enough truck drivers but that they’re not in the cities or regions that need them. These drivers are key to global trade running smoothly. How they are treated as key workers in an ailing infrastructure is an issue that needs review.
In Ireland during January 2022, the heavy goods vehicle (HGV) resting and driving times were relaxed because of a driver shortage caused by the spread of the Omicron variant. The Road Safety Authority (RSA) announced that the fortnightly driving limit would be temporarily changed from 90 hours to 112 hours. The number of daily rest periods that drivers could take between any two of their weekly rest periods was also increased from three to five, which allowed some flexibility for drivers who encountered delays during their journeys.
There is a shortage of HGV drivers across Europe and ongoing Brexit negotiations have led to a severe shortage of lorry drivers in the UK impacted by the loss of drivers from the EU. The Brexit impasse has continued to cause havoc at the ports of Dover and Calais since November 2020 when lorries created 5-mile queues during trials of post-Brexit checks and certain permits were required to enter the United Kingdom. This was exacerbated in December 2020 when France closed its borders over Covid concerns just before Christmas, leaving drivers stranded. Even in 2022, during the new year period, there have still been issues with the increased paperwork which was taking 10-20 minutes to process.
The disruptions in shipping have been equally challenging, with the unfortunate episode of the Ever Given, one of the world’s largest container ships, becoming stuck in the Suez Canal in March 2021. The ship blocked one of the world’s major trade routes for nearly a week, creating a backlog of deliveries expected at ports globally. It seems that this was the least of the industry’s worries though.
Later in the year, major ports in the USA experienced queues of cargo ships, ready to unload containers, but with little to no labor available to facilitate movement. During October 2021, Hundreds of vessels were stuck off southern California’s port of Los Angeles as well as Long Beach, some idling in the ports’ waters for weeks. At the same time in the UK, one of the world’s largest container shipping companies, Maersk was diverting ships from ports such as Felixstowe due to congestion. New York has mostly been unaffected up until this point, but it too has now been hit by a labor shortage due to staff quarantining with Covid.
When supply doesn’t meet demand
Omicron may not be as deadly as other strains of Covid-19, but it is more contagious, causing many workers to become sick at the same time. Asia has been worse hit than the West by this mutation of the virus. In China, the manufacturing hub of Zhejiang has recently seen tens of thousands of people in quarantine as the country has a strict zero-Covid policy. Zhejiang is also where the world’s largest cargo port is found, Ningbo-Zhoushan. A lockdown in the city of Xi’an also caused memory chip maker Micron to work with a reduced workforce towards the end of 2021. The chip shortage forced Apple to curb its production of iPads by 50% in November to guarantee enough chips for its iPhone 13 amid supply chain issues. Although there has been a shortage of these valuable semiconductors used in everything from cars to smart devices, there is no shortage in demand.
The disruptions to international trade have driven up shipping costs, and yet the irony is, there aren’t enough workers or equipment available to unload at international ports. When the goods are finally discharged, there then aren’t enough trucks to distribute goods across the destination country.
To add to logistical problems, new rules and regulations that came into play on January 1st in the UK have also had small businesses concerned over higher prices of goods from the EU. Everything from Parma ham from Italy to olive oil from Greece will be affected by the changes, potentially hitting small EU exporters hardest. Larger companies may be able to open distribution centers in different European countries to help prevent bottlenecks in the supply chain. However, the bureaucracy involved may make it difficult for smaller EU and UK businesses to carry the burden of import and export costs, plus the time needed for goods to clear customs, causing them to lose potentially vital customers.
In the USA, President Biden is under pressure to loosen vaccine requirements for truck drivers that frequently cross the border between the United States and Canada border.
As much of the world now struggles with the possibility of certification for essential workers showing that they’ve had their vaccines, it is difficult to know how the crisis will pan out. Economists estimate that due to months of shipping backlogs, geopolitical tensions, and continued labor shortages, we will face supply chain challenges well into 2024. One thing is certain, the need for individuals highly qualified in supply chain management shows no sign of subsiding.
Could you have what it takes to be a supply chain innovator?
The global economy relies on supply chain issues being resolved by new and innovative initiatives. Whether supporting key workers to do their job or automating sections of the supply chain for higher efficiency, there has never been more demand for expertise in supply chains. A superior transport and logistics network is needed, not just to return to pre-pandemic levels of excellence, but to surpass them.
A 100% online MBA with Supply Chain Management from Alba Graduate Business School, The American College of Greece could help you build your knowledge in this area and help build back a better global supply chain. Find out more about the course and how to register today so you can take the next step in your career.
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