China recognizes the difficulty of containing the new outbreak of covid-19 2:13
New York (CNN Business) --
Global supply chain problems were supposed to get better by now.
Instead, experts say they are getting worse.
The Russian invasion of Ukraine, which cut off Ukraine's exports and sanctioned Russian companies, has triggered a series of new supply chain disruptions.
So has the rise in Covid-19 cases in China, which has led to temporary lockdowns in some parts of the country.
No one anticipated that the supply chain would be completely back to normal by now.
Even before these latest crises, shortages of some parts and raw materials were expected to continue until 2023. But companies had been confident that there was finally a light at the end of the tunnel.
In early February, three weeks before Russia invaded Ukraine, GM forecast it could build 25% to 30% more vehicles this year than it did last year.
"We definitely saw an improvement in the first quarter over the fourth. We saw that the fourth quarter was better than the third. And with the plans that we have in place, when we get to the third and fourth quarters, we will start to see the limitations of semiconductors," GM CEO Mary Barra told investors while discussing fourth-quarter results and the outlook for 2022.
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But GM just announced a two-week shutdown starting next at its Fort Wayne, Indiana plant, which builds the Chevrolet Silverado and GMC Sierra pickups, due to a lack of chips.
Ukraine and Russia do not produce the chips used by automakers around the world.
But Ukraine is the world's leading source of neon, a gas needed for lasers used in the chip-making process.
Although some chipmakers stocked up on neon ahead of the fighting, there are concerns about the long-term availability of the gas.
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"People expected the semiconductor shortage to continue. But no one predicted the Ukraine thing," said Bernard Swiecki, director of research at the Center for Automotive Research, a Michigan think tank.
Supply chain disruption is one of the main factors driving up prices around the world, as demand for goods such as cars, oil and chips has outstripped supplies.
And predicting when those disruptions will end is almost impossible due to the uncertain nature of the war in Ukraine.
The more time passes, the more problems it can cause.
"Before the [Ukrainian] crisis, we thought things would be back to normal in 2023," said Joe Terino, who heads the global supply chain practice at management consultancy Bain & Co. "Now it's hard to say when could end, because we don't know how long it will last, how far it could go.
The problems keep piling up.
Global supply chains may be disrupted for quite some time.
“We were living under the assumption that products, resources can move freely across geography,” said Hernán Sáenz, who leads Bain's global performance improvement practice.
"When that is no longer true, it has huge implications. You can adapt in the long term, but in the short term, recovery is very painful."
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Supply chain problems caused by fires, bad weather or other natural catastrophes are the norm for those who manage supply chains, according to Kristin Dziczek, policy adviser at the Chicago Fed.
The difference is that these problems usually affect a city or region, not the entire planet, as happened with the pandemic.
"Supply chain managers were doing miracles and we never realized this because these things happen all the time and they are able to adjust," he said.
"But nothing like this has ever happened."
And the pervasiveness of the outages bogged down the system.
The old expression that a chain is only as strong as its weakest link is apt for supply chains, he said, since problems with current supply chains have shown that there are multiple weak links.
"Chains are an apt metaphor and always have been," he said.
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