Wondering what has global supply chains out of sorts? Rodrigo Salas Musso digs in.
These days, most people have probably come across empty store shelves or seen “out of stock” on web pages. Shortages became common during the COVID-19 pandemic, and even though the pandemic appears to have passed, supply chain issues remain a serious challenge. Supply chain expert Rodrigo Salas Musso digs in.
“Some people expected supply chain issues to ease as soon as we got past the worst of the pandemic, but as we’ve seen, that’s simply not the case,” says Rodrigo Salas Musso. “Clearing out backlogs and meeting high demand has proven difficult.”
During the worst pandemic, borders were largely closed, social distancing impeded many companies, and many other issues cropped up. As a result, container ships were often stuck treading water outside ports. Even if ships were cleared to unload their cargo, COVID-19-related shutdowns often meant dock workers and other transportation experts (like semi-truck drivers) were in short supply. A tight labor market is also making labor power hard to come by.
“People make the world go round,” Mr. Musso points out. “If you don’t have the necessary labor power to complete a job, you’re not going to complete that job, at least not as quickly as you want to. Right now, there aren’t enough workers in the supply chain to meet demand.”
Labor shortages often mean that goods travel more slowly through supply chains. Shorthanded companies can’t clear backlogs either. Meanwhile, computer chip shortages have constrained vehicle production, including semi-trucks. Most modern vehicles rely on computer chips. During the pandemic, demand for laptops, smartphones, and other devices surged as folks were stuck at home.
Many people needed devices, not just for entertainment but also to complete schoolwork and work for their employers. While chipmakers have worked to ramp up demand, they, too, have found labor, supplies, and other inputs in short supply. Ultimately, supply chain issues can quickly evolve into a negative feedback loop.
China Lockdowns Restraining Production According to Rodrigo Salas Musso
During the first phase of the COVID-19 pandemic, China minimized outbreaks. Now, however, COVID-19 is plaguing countless cities in China. In turn, companies in China have been forced to shut down production facilities, including factories.
“For now, the COVID-19 pandemic seems to be under control in Europe, the United States, and many other countries, too,” notes Rodrigo Salas Musso. “However, China is suffering perhaps its worst COVID-19 pandemic. With China being one of the biggest manufacturing countries in the world, that means production has slowed dramatically not just in China but across the globe.”
If production is halted anywhere in a supply line, it can have a ripple effect through the entire supply chain. Many production facilities in Europe, North America, Southeast Asia, and elsewhere depend on China for at least some inputs. They say a butterfly flapping its wings in London could cause a typhoon in Hong Kong. Perhaps more accurately, a cough in cough in Beijing might shut down factories in Detroit and vice versa.