How Real Is This Supply Chain Crisis?
You've probably heard or seen reports that there is a significant supply chain problem going on right now. Is this, however, real or simply a rumor? What impact will it have on customers, distributors, producers, and other major players in the trade industry if it is true?
You have likely heard reports of a current supply chain crisis. This is frequently cited in articles warning customers that they may be unable to find holiday gifts for everybody on their list. But is this real, or just fear mongering?
Is There Really a Supply Chain Crisis Going On?
In 2020, the Covid-19 pandemic brought numerous international industries to a stop, one of them being the shipping industry. The pandemic's disruption of worldwide trade was, and continues to be, a major issue. While affluent countries made incremental headway toward returning to something resembling normal in 2021, many developing countries continue to struggle. And while these countries are key players in global manufacturing and shipping, many of them have not had the luxury of offering vaccines to all their eligible populations.
When you combine this with the rising demand for goods across a wide range of industries, it's no surprise that there are issues. Because vaccinated people in industrialized countries now feel more secure, they are returning to pre-pandemic levels of consumption, if not greater. But manufacturers and distributors are struggling to meet this surge in demand for a variety of reasons, including a lack of raw materials and key components.
Backlogs at Ports Are Very Real
There are also other factors at play. Power shortages in China have hurt production in recent months. And there are also problems within Western nations, such as a Brexit-induced shortage of truck drivers in the UK. Germany and the US are also experiencing a shortage of drivers as workers are becoming increasingly active in labor movements and are choosier about the type of work they’re willing to do.
Perhaps most striking have been the backlogs at US ports, specifically at the twin ports of Los Angeles and Long Beach, which together account for 40% of all sea freight entering the US. By late November, the backlog at these ports had eased significantly thanks to stevedores and other dockworkers unloading freight and working around the clock. What’s also helped is the announcement of fees of $100 a day for every container left on the dock. Since the announcement, the number of lingering containers has decreased by 33%.
So, Is This a Real Crisis?
The problem with the supply chains is certainly real. This past October, online shoppers encountered over 2 billion out-of-stock messages. It’s possible certain items won’t be able to be delivered in time for Christmas. But is it a crisis? Probably not for consumers. We’ve not yet seen any drastic shortages in food, medication, or other essentials.
Distributors and manufacturers, on the other hand, are in a totally different situation, which might result in a major crisis for them.
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