Out of Stock: The Supply Chain Crisis Explained

By Chloe Yang

In many ways, the world was impacted the most by the pandemic because of a lack of precautions. As the Omicron variant continues to surge and countries struggle to keep cases low, the oversight in providing the proper health precautions has led to the number of total worldwide COVID cases skyrocketing to 400 million. But beyond that, a failure to bolster the global supply chain has led to nearly every single aspect of it being affected by the pandemic. From manufacturing, transportation, logistics, and more, the efficiency of the supply chain was greatly slowed following the spread of COVID-19. 

Primarily, manufacturing was one of the first steps in the supply chain to be impacted by the pandemic. In industrial and manufacturing giants like China, South Korea, Vietnam, and even Germany, thousands of factories were forced to shut down or reduce production due to quarantine restrictions and sick employees. As a result, shipping companies subsequently cut down their schedules, anticipating a global drop in demand for transporting goods.

However, this prediction proved to be a fatal mistake. While demand for certain goods and services, such as airline tickets and restaurant meals, did lessen, this did not hold true in numerous industries. Indeed, people instead redirected money that they once would have spent on experiences and promptly funneled them to home investments, which doubled as offices and classrooms during lockdown. From office chairs to blenders, video game consoles, gym equipment, and even paint for redecoration, demand in the home improvement sector quickly skyrocketed. Peloton, an American home exercise equipment company, for example, saw their stock rise by 350% in just 2020 alone, due to the increased demand in at-home exercise equipment.

But factories soon found it difficult to keep up with this sudden increase in consumer demand. Some items, for example, are critical components in the manufacturing process. Computer microchips were among the items that were most affected by the supply chain crisis, due to their advanced and complicated production process. Because of this, factories struggled to produce items such as automobiles, computers, displays, and other vital electronic products. This shortage especially burdened teachers and students around the world, who needed computers, microphones, and web cameras for virtual learning, widening the supply and demand gap even more.

Physical transportation has also created stalls in the supply chain. Since the beginning of the pandemic, containers have been simultaneously scarce and in high demand. As masks, hospital gowns, and other personal protective equipment were shipped from China and the US to nations around the world as the virus first proliferated, empty containers quickly piled up in remote areas that do not typically ship exports back to China or the US, slowing global container turnaround rates. At the same time, nations began greatly increasing production in order to keep up with the aforementioned increased demand. The newfound scarcity of containers combined with the spike in demand for them led to the skyrocketing of the cost of cargo transportation. China-US container shipping even rates ran as high as $20,000 in 2021.

Physical bottlenecks complicated cargo shipment ever more. Ports and docks across North America and Europe quickly found it difficult to keep up with the heavy influx of container ships following the manufacturing increase from nations like China. Consequently, ships were forced to anchor in the sea for days before having the chance to load and unload cargo. Similarly, with truck drivers and dockworkers in port areas being forced into quarantine, the availability of transportation workers decreased, slowing the cargo transportation process even more. 

While the global supply chain crisis was exacerbated by the COVID-19 pandemic, without a doubt, the issues embedded within the crisis were present before the virus. Indeed, the pandemic only highlighted existing issues within the supply chain itself. However, nations around the world can take steps to ensure that a similar crisis can be averted in the future.

The United States, for example, can focus on becoming more self-sufficient in manufacturing to guarantee that heightened reliance on Chinese manufacturing cannot cause delays in the supply chain. The world’s reliance on China’s production of goods was one of the largest contributors to the crisis. While the US likely cannot keep up with China in more labor-intensive industries, it can invest more heavily in technological and research-intensive production. Recently, the Biden administration invested $20 billion in American technology company Intel to build a semiconductor factory in Ohio.  Increasing domestic manufacturing capacity as well as diversifying suppliers is a crucial first step to alleviate the pressures caused by the supply chain shortage. 

Additionally, the labor shortages in the transportation and warehousing industries could be reduced by the increase in global wages for the sectors. With the annual turnover rate reaching 94%, retention is a big problem in the global trucking labor market, but one that can be mitigated by higher wages. Additionally, improving working conditions in the sectors can also make the jobs more attractive to licensed truck drivers. The 2021 bipartisan infrastructure bill that was passed in the US  failed to address these issues, overlooking the inclusion of funding for truck parking, for instance. However, by providing more competitive wages, as well as increasing investment in overall infrastructure, nations around the world can diminish the substantial labor shortage to prevent another supply shortage in the future.

While the current supply crisis may be temporary, the underlying issues within the supply chain will undoubtedly persist. If the global community can cooperate to solve these problems using collaborative solutions, another supply chain crisis can hopefully be averted in the future.