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Disruptions in supply chains: What we can learn from flight chaos for the economy

2022-07-15T09:40:00.103Z


The travel chaos at the airports is a lesson in what is going wrong in the economy. Identifying the causes and finding solutions can help contain inflation and stave off a recession.


Enlarge image

Almost missed flight?

Then the next vacationers come even earlier, the queues are getting longer and longer

Photo: David Young / dpa

Sometimes practical experience can replace an entire economics degree.

Anyone who spends a day in the chaos that is currently prevailing at German airports will immediately understand what has been going on in the economy for the past two years.

And can think about solutions while waiting in line at security.

The approaches that emerge could help prevent a recession.

It starts out harmless.

You have a 4:40pm flight to Spain.

Your airline recommends that you be at the airport three hours in advance.

Even with that it's going to be close, but you just about make it.

Tell your friends who are flying a day later about the long wait.

Accordingly, they calculate four hours.

They are not the only ones and - oh, wonder!

– even the four hours are suddenly calculated quite tight.

The first reports of missed flights are making the rounds.

A few days later, most passengers are already counting on a waiting time of six to eight hours, and the chaos escalates.

In the end, in principle, all holidaymakers who want to get a flight during the day have to queue at the security check at five in the morning, the queue stretches through the entire airport building.

The dangerous effect of pull-forward effects

Such so-called pull-forward effects are the explanation for the worsening of global supply chain problems in recent years: fearing that certain goods would not be delivered or not delivered on time, industry and trade ordered them several months earlier than they needed them and put them in stock .

The result was traffic jams in numerous ports, and freight rates rose to record highs.

The original triggers for the shortages were corona-related production stops, changed consumer behavior due to the lockdowns and most recently the Russian invasion of Ukraine.

But the market participants turned on the turbo for material shortages and delivery problems by bringing their purchases forward.

In order to understand what needs to happen in order to resolve these problems, let's first go back to the airport chaos, including an analysis of the causes.

The airport operators cite a lack of staff and a high level of sick leave as the causes of the disaster.

During the pandemic, when the number of holiday flights had fallen to almost zero, they laid off employees who had since found other, more attractive jobs.

However, neither the holiday-related rush to the airports nor the associated shortage of staff fell out of the sky, on the contrary: Both were quite accurately predictable based on the ticket bookings.

It doesn't take a degree in business administration to understand that more staff should have been hired, trained and subjected to safety checks in good time for this time - and that planning should have been made in advance.

How we contain the chaos

Could have supply chain.

What can be done now?

The federal government's plan to recruit 2,000 temporary workers from abroad is certainly a first step.

However, experts point to a fundamental problem in the aviation industry: although the level of qualifications, for example in security checks, is below average, the hurdles for recruitment are unusually high.

This is due to the necessary reliability check of the employees, since they work in a security-sensitive area.

The federal states are responsible for these checks, which take up to two months to carry out.

Obviously, accelerating the procedures would be an important lever to alleviate the misery at many airports.

And if it fails because of the wage level, here is a little tip: some students and other people would be happy to do a summer job that promises earnings of 15, 20 or even 30 euros per hour.

Too expensive?

Hardly if you offset the losses that result from half-empty planes and the compensation payments if someone missed their flight through no fault of their own.

The frustration of vacationers can also be alleviated by queue management.

Looking at the queues in and in front of the terminals, there simply doesn't seem to be one.

The best measures against high prices

What can be learned from this for global supply chain problems and shortages of goods?

Some parallels are hard to miss.

Many container ships have had and still have to contend with unusually long waiting times at terminals.

Port operators and authorities are trying - sometimes more, sometimes less successfully - to find regulations to shorten waiting times.

Here, too, more efficient queue management is required.

In addition, there are sensible general steps to reduce shortages.

The most important thing is to let market forces unfold.

Even seemingly absurd price increases for certain goods and services should be accepted instead of responding with well-intentioned but counterproductive government interventions such as price caps or discounts.

Because it is precisely these unfiltered price increases that offer the best incentive for producers and logisticians to expand their range in search of higher profits.

The best way to stop high prices is – high prices.

Social hardship and price increases, which threaten the existence of companies, must then be countered with lump sum payments to the households and companies that are particularly affected.

In view of the lack of personnel in many sectors, the state should help alleviate the problems by facilitating immigration, temporarily deregulating labor law provisions and taking measures to improve the compatibility of family and work.

It cannot be ruled out that the shortage of personnel and material will lead to a decline in economic output.

However, avoiding this must be the goal of business and politics.

For just as canceling flights is not a satisfactory answer to the fact that some airports are being overwhelmed, so those responsible should not give up and regard a recession as inevitable.

It's not, no matter how chaotic the situation is.

Cyrus de la Rubia is a guest commentator for manager-magazin.de.

Nevertheless, this column does not necessarily reflect the opinion of the editors of manager magazin.

Source: spiegel

All news articles on 2022-07-15

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