A supply chain is the system of all people, businesses, resources, tasks, and technological advancements involved in producing and distributing a good. An entire supply chain is included, from the delivery of raw materials from the supplier to the manufacturer to the final delivery to the customer.
The supply chain has always been and will continue to be an integral part of any business. A smooth supply chain does not only benefit the vendor but also the buyer. But in recent years, especially after the pandemic, the supply chain has been dramatically disrupted and hasn’t been able to recover from it ever since.
The global pandemic highlighted many flaws in the system that need to be rectified on priority basis to maintain a smooth operation and overcome the effects of the pandemic. Today we will look at some of the things that will continue to affect the smoothness of the supply chain and will cause problems for the suppliers.
The COVID-19 Pandemic
At the start of 2020, the first covid breakout happened and lockdowns and social distancing protocols were put in place. This caused many ports to close and operations were at a halt throughout the world. The supply chain that was disrupted, as a result, hasn’t been able to recover from that. The backlog of shipments is still a major issue. With many ports still following the social distancing protocols, the lack of labor still continues to slow down the process of clearing backlog shipments.
And just about when things were starting to get better, the news of a new covid variant surfaced. And with many people testing positive for covid, the possibility of another lockdown can not be ignored.
If the new variant of the Coronavirus is not contained properly, this can result in another global pandemic, which can result in another lockdown that can make the supply chain and increase the shipment backlog issue even worse than it already is.
Rising Cost of Living
Households are being hard-hit by rising food prices due to the skyrocketing inflation rate. Demand for goods and services is uncertain as a result of expectations that consumers will have to make significant spending cuts this winter.
This makes it challenging for supply chain planners to predict in advance the precise quantities and types of goods that consumers are likely to require. This picture has already been significantly altered by the pandemic, but forecasting demand for 2022 will be even harder.
Since inventory for the Christmas shopping season is made and shipped months in advance, inaccurate forecasts are likely to result from the current uncertainty. This might cause some people to be disappointed this Christmas if they can’t find certain products or if they have to pay more because of tighter supply driving up prices.
Raised cost of living has also affected the cost of operations as the cost of labor has also increased due to the shortage of labor.
Supply chains are under more stress as a result of industrial action. This summer’s computer supply chains have already been hampered by striking truckers in South Korea, and construction material deliveries have been impacted by rail strikes in the UK.
German and British dock workers have been on strike, and strikes at the Port of Liverpool across the Irish Sea are expected to clog up Ireland’s freight hubs. In the upcoming months, some unions in the UK have proposed coordinated strike action, which could further disrupt supply chains.
With the Russia-Ukraine war, Russia has suspended its supply of natural gas to Europe, which has resulted in gas shortages, forcing European companies to look for alternative fuel sources. According to research from the German Chambers of Industry and Commerce, 16% of its businesses plan to either reduce production or partially cease operations.
The biggest economy in Europe is Germany, which is heavily reliant on exports. The effect on global manufacturing supply chains, if a recession is anticipated, could be sizable.
However, energy price increases are having serious negative effects on businesses even in nations that are less dependent on Russian gas. Pakistan has cut the length of its workweek to reduce energy consumption. Fertilizer production in Norway has decreased, which has an impact on the food supply chain.
Retailers in the US are lowering their sales projections, and automakers in the UK are concerned about their output. Due to a lack of power, electronics factories and car assembly lines have already started to close in southwest China. Global supply chains will be affected by each of these disruptions.
Global Political Uncertainty
The main reason why countries are currently experiencing high energy and food prices is because of the invasion of Ukraine. This year, it has disrupted supply chains, causing a global food crisis.
Agriculture output is also being constrained in many nations by a lack of fertilizer. Even though some grain ships have now departed Ukraine, releasing crucial supplies that will address famine in nations like Yemen, this will not end the problem of the world’s food supply.
Tensions between China and the US, which were already present before the pandemic, have persisted in other parts of the world. Following US House Speaker Nancy Pelosi’s visit to Taiwan in August, recent Chinese military drills in the Taiwan Strait disrupted one of the busiest shipping lanes on Earth.
For instance, supply chains that supply semiconductors used in computers to manufacturers worldwide could be disrupted by any further escalation of tensions.
These are some of the major factors and trends that have been affecting the global supply chain and will continue to have an effect on the chain, if not rectified soon.