Four keys that explain the paralysis in the supply chain and how it affects you

By Kevin Ketels -

If you walk into any store in America these days, you are likely to see row upon row of empty shelves.

Shortages of virtually every type of product, from toilet paper and athletic shoes, to trucks and chicken, are seen across the country.

Looking for a book, a bicycle, a crib or a boat?

You may have to

to get your hands on it.

I recently visited my local ski shop and they barely had a few boots, skis, goggles or poles, two months before the ski season starts.

The owner said it is usually almost fully stocked at this time of year.

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Containers stacked in the port of Long Beach, California, on October 1, 2021.Jae C. Hong / AP

This may seem a bit strange to some Americans given that the country has been living with the COVID-19 pandemic for more than 19 months.

Shouldn't the problems in the supply chains affected by the health crisis have been solved by now?

As someone who researches global supply chain management and teaches on the subject, I think there are four main reasons, which are interrelated, why this crisis continues.

1. Demand is skyrocketing

When the pandemic first hit the country in March 2020, companies were already preparing for a prolonged recession and the typical resulting drop in demand.

Retailers and automakers, many of which had to close due to lockdowns, canceled orders from their suppliers.

That makes sense.

In April, the unemployment rate reached 14.8%, its highest level since the Labor Department began collecting this data in 1948. And consumer spending plummeted.

But something strange happened in the late summer of 2020. After the initial shock, consumer spending began to rebound and was approaching pre-pandemic levels in September, thanks in large part to the trillions of dollars in aid that Congress was pouring on. the economy and people.

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In March 2021, consumers again spent record amounts of money on everything from new computers and chairs to work from home, to bicycles and sporting goods, as people looked for safer ways to get around and be entertained.

The demand for consumer goods has continued to increase since then.

While that's generally a good thing for businesses and the country's economy, the supply chain for most products has not been able to keep up, or even catch up.

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2. Shortage of workers

Even as consumer demand increases in the US and elsewhere,

are causing significant production delays.

Less than a third of the world's population has been fully vaccinated against COVID-19, and nearly 98% of those people live in richer countries.

Low levels of vaccinated workers in major manufacturing centers such as Vietnam, Malaysia, India and Mexico have caused delays in production or reduced capacity.

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Vietnam, for example, plays a key role in the apparel and footwear industry, as the second largest supplier of shoes and clothing to the United States after China.

Less than 12% of its population is fully vaccinated and many factories have been closed for long periods due to outbreaks and government closures.

Failure to vaccinate more people in developing countries more quickly likely means that worker shortages will continue to plague supply chains for many months.

3. Shortage of shipping containers

The insatiable demand for more from Americans has another consequence: Empty containers pile up in the wrong places.

Large steel shipping containers are critical to global supply chains.

In 2020, the US imported more than $ 1 trillion in goods from Asian countries.

And most of those consumer goods arrive in the United States on container ships.

To get an idea of ​​scale, a single container can hold 400 flat-screen TVs or 2,400 shoe and tennis boxes.

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But many of those containers heading to the United States have no way of returning to Asia.

The reasons involve a lack of workers, complicated customs procedures, and a host of other problems.

The shortage has quadrupled the price of containers over the past year, which in turn is contributing to higher consumer prices.

4. Ports paralyzed

All of these problems are contributing to another challenge: America's ports have become clogged with ships waiting to unload.

A large ship can carry between 14,000 and 24,000 containers.

That means a ship waiting to dock could carry up to 5.5 million televisions or 33.6 million shoes.

Right now, more than 60 container ships are anchored in the ocean off the ports of Los Angeles and Long Beach, unable to unload their cargo.

Ports are also clogged in New York, New Jersey, and other places globally.

Normally, you don't have to wait for these ships to dock and unload their cargo.

But record import demand and a shortage of truckers, containers and other equipment have caused substantial delays.

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No end in sight

Before COVID-19, global supply chains worked quite efficiently to move products around the world.

The companies used a

philosophy

that minimized waste, inventory, and expenses.

The cost of that, of course, is that even small problems like a hurricane or factory fire can cause outages.

And the pandemic has caused a collapse.

While I don't expect most of these issues to be resolved until the pandemic is over, some things could ease some of the pressure, such as a shift from consumer spending on goods to services and an increase in global vaccination rates.

But the difficult reality is that American consumers should expect empty shelves, delays and other problems until well into 2022.