Is the End in Sight for the Supply Chain Crisis?

Supply chain issues have plagued the globe throughout 2021, and it’s not just the semiconductor shortage causing the problem. It started during the pandemic in 2020 but has had a knock-on effect ever since with thousands of businesses unable to recoup from the global shutout followed by the surge in demand for products delivered to their homes.

Demand soared for items such as consumer electronics and even cars. All these new devices needed one key component, a semiconductor chip, which caused a severe bottleneck in the supply chain.

Not only were consumer electronics facing huge lead times, but when the world began to open back up, the auto industry had lost billions of dollars and couldn’t resume manufacturing due to the lack of this integral component.

What caused the bottleneck?

The initial reaction to the pandemic was a complete global shutdown which created a backlog in the supply chain, even when things were up and running again it was hard to catch up. Many manufacturers exceeded capacity. Experts suggested there wouldn’t be a full recovery until the end of 2021.

Then there was the Evergiven situation which blocked the Suez Canal for a week. This wasn’t a lone incident either, as early last month, yet another ship ran aground, causing other traffic to be diverted

Labor shortage

The overall increase in demand teamed with a never-ending backlog highlighted another weak link in the supply chain, the lack of qualified drivers to deliver items to customers. It’s an issue prevalent not just here in the US, but over in the UK too.

The US has sought additional help from across the border, bringing in truckers from Canada, Mexico, and South America. However, in the UK, things aren’t so easy. Following Brexit, many Europeans had to leave the UK. While the Prime Minister offered temporary work visas for truckers in mainland Europe, many of them declined, echoing political tensions following the UK’s decision to leave the EU. Many residents of the EU are making a defiant stance. Additionally, there’s a struggle to fill warehouse roles, which further compounds the problem.

Shipping Costs

Shipping costs have also skyrocketed according to ING and will continue to rise, causing further strain on the industry. Though a “flood of new containers” is expected to ease pressure on the market, this won’t be fully resolved until 2023. Reasons listed include the imbalances in supply and demand caused by the pandemic, a lack of alternatives for cost-effective solutions, and congestion of ports. Ocean freight remains the most fiscally beneficial option for now.

Solutions

So what kinds of solutions are being sought to resolve the onslaught of issues the supply chain is facing?

One primary focus is utilizing emerging technology and warehouse automation to help speed up the process. Research firm ABI suggests that technology doesn’t need to be disruptive and encourages digital transformations across all sectors.

To tackle the labor shortage, many leaders of logistics firms are turning to robotics as a helping hand.

In terms of shipping costs, only time can restore balance to the supply chain. Container prices have skyrocketed, and until more are delivered, they could continue to rise.

Industry leaders need to consider diversifying their supply chain strategy. Creating new relationships with more partners could help ease the bottleneck and cause less strain on the industry as a whole. Especially in the lead up to the holidays and further outbreaks of COVID, it could be a rocky road to recovery for supply chains.