Why supply chain problems will continue in 2022
Two very serious issues have combined to create a mega disaster that will impact Christmas and likely last until 2022.
When the global economy woke up from its coronavirus lockdown-induced slumber in mid-2020, there was a broad consensus that things would return to normal soon.
That in a relatively short period of time, the world economy would come back to life, and the problems created by its temporary hibernation would be resolved relatively quickly.
As the pandemic’s second Christmas approaches, resolving global supply chain issues seems even further away than it did at the start.
Rather than global supply chains showing significant improvement after having had almost 18 months to recover, by some measures the ongoing disruption is much worse than it was around this time last year.
While Australia has so far been spared the worst of the global supply chain problems and the ongoing energy crisis, several major retailers have warned households to do their Christmas shopping.
The challenges keep coming
During this week of last year, six container ships were awaiting the opening of a berth at the ports of Los Angeles and Long Beach in the western United States. Today, 77 people wait at the anchorage and the problem has turned into a political minefield, as concerns continue to be expressed about a potential shortage of goods and further disruption to U.S. manufacturing supply chains.
These two ports account for 31 percent of all US maritime trade and are essential to the economic health of the United States.
But it is not just about backward ports and a maritime logistics system strained by the weight of record levels of imports. From a shortage of truck drivers to areas with insufficient warehouse space, America’s logistics system struggles to cope with huge influxes of goods and it is not alone.
All over the world, nations are facing the challenge of various supply chain issues.
In Japan, automakers have cut production due to a shortage of computer chips, illustrating how the absence of even a single component can lead to the abrupt shutdown of the most organized and efficient businesses in the world.
In the UK, nearly two-thirds of companies surveyed by the Confederation of British Industry (CBI) warned component shortages would impact production over the next three months. This is the highest proportion of companies warning of supply chain problems since 1975, a year when Britain faced major economic stress and a widespread strike.
In China, there is already a long list of challenges ranging from the continued scarcity of coal to the slowing Chinese economy.
But earlier this week, another hurdle arose for global supply chains, a shortage of diesel fuel in China, caused by the large-scale use of diesel generators due to power outages and high prices. electricity.
As a result, gas stations in several Chinese provinces are rationing diesel supplies, in hopes that the shortage does not start to affect transportation logistics and further impact already strained manufacturing supply chains.
The elephant in the room … the pandemic is not over
While hopes are high in the Western world that the pandemic will be largely behind us thanks to the vaccine, in other parts of the world things are not so rosy.
In China, the National Health Commission recently warned the Chinese public that it expects the number of new cases of Covid to continue to rise, warning that the epidemic could spread further.
With the ongoing outbreak currently affecting provinces in China, including the main coal-producing region of Inner Mongolia, there are concerns that the outbreak could further undermine the Chinese economy and exacerbate problems in the global supply chain.
Outlook for Australia
From auto parts to home furnishings, some retail suppliers have had inventory issues for over a year now.
But as supply chain problems worsen in parts of the world and the specter of Covid returns to haunt China once again, there are growing fears that Australian businesses and consumers are being affected in the months to come and next year.
In a recent update to shareholders, Endeavor Group, which operates the Dan Murphy’s and BWS chains, warned that disruptions in the global supply chain were limiting access to certain beverages, especially imported items such as liqueurs and spirits.
RMIT Associate Professor and logistics expert Vinh Thai recently raised concerns about the impact of supply chain issues on Australian consumers.
Prof Thai said big delays and more expensive consumer goods are “a big possibility” as we head into Christmas.
Australia’s internal supply chains are also expected to face hurdles as the holidays approach.
Australia Post CEO Paul Graham braces for “significant challenges” as the postal service faces the busiest Christmas season in the nation’s history.
This prompted Australia Post to experience a hike in hiring, employing 4,000 temporary workers to try to ensure Australians receive their gifts on time.
It’s not over until it’s over
Since the start of the pandemic, there have been promises that the end of supply chain disruptions was imminent, that on an arbitrary date things would somehow be resolved.
But as the crisis continues to worsen in many industries around the world, these pleasant but ultimately empty platitudes are falling more and more on deaf ears.
While everything from the European energy crisis to further shutdowns continues to impact global supply chains, the problems facing businesses and consumers are far from resolved.
Some experts have suggested that it may be as late as the middle of the decade before the problems are finally resolved.
Like so much else throughout the pandemic, it’s incredibly difficult to predict how such an absurdly complex system as global supply chains will react.
Ultimately, we don’t fully understand the variables and uncertainties the system faces and anyone can guess when a 2019-like level of normality will finally be reached.
Tarric Brooker is a freelance journalist and social commentator | @AvidCommenter