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The Huge Supply Chain Disruptions Having a Perilous Impact on the Economy!

By Bill Durham
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Supply chain disruptions do not have to be as earthshaking as a container ship stuck in the Suez Canal, although clearly, that disaster just added to the problem. The perilous impact of supply chain disruptions can come in many shapes and forms. Let’s explore a few.
The Huge Supply Chain Disruptions Having a Perilous Impact

Pandemics

This is where it all began, so we may as well start here. Sure, there were occasional supply chain disruptions before the pandemic, caused by phenomena such as port strikes, some of which took more or less time to be resolved. The keyword here being “resolved.” 

We have no idea when the current pandemic will be resolved, which means that we have no idea if or when the resulting supply chain disruptions will be resolved. This uncertainty arguably poses the greatest threat to the viability of so many companies struggling to deal with pandemic-related supply chain disruptions and to our economy as a whole.

Even if we manage to keep the pandemic in check here in the United States, that won’t be enough to resolve the ongoing supply chain disruptions for one simple reason: We live in a global economy. To reduce the perilous impact of supply chain disruptions, we would need to see the pandemic resolved worldwide. And that’s one heck of a tall order. Some might even say that it’s a pipe dream.

Workforce Shortages

As we near the 2-year mark, in round numbers, we have lost 780,000 U.S. souls to COVID-19. The figure worldwide is 5.2 million. In the U.S., there have been 48.5 million confirmed COVID-19 cases. The figure worldwide is 261.5 million. 

Of course, not all of these people were in the workforce. Still, as the pandemic raged, companies across the board lost employees – permanently or for varying amounts of time. Workforce shortages impacted just about every aspect of the business. We saw, are still seeing, disruptions in:

  • Production
  • Shipping
  • Deliveries
  • Customer Service

Resulting in disclaimers like this one all over the Web:

PLEASE NOTE – FedEx is currently experiencing customs delays of up to an additional five business days to some U.S. locations.

Production Delays

It’s called a “supply chain” because if anyone link in the “chain” is broken, it causes a “chain reaction.” 

For example: The production of computer chips in China is disrupted due to workforce shortages, and the shipment of those chips to the manufacturers of cars and cell phones that require them is delayed. And that is causing disruptions in the production of new cars and new cell phones. And that is causing a market for used cars and used cell phones (I kid you not) at ridiculously high prices. 

Another example: A U.S. mattress manufacturer that relies on springs produced in the Philippines is notified that the shipment previously promised for a June delivery has been delayed by at least three weeks. The mattress manufacturer is forced to cease production, awaiting the delivery of the springs, which means temporarily laying off employees while the factory is idle and losing money every day. What’s more, the spring manufacturer has just been notified that the cost per container has just doubled or, in some cases, tripled. The ground freight rate to ship the springs to the port has also doubled. Therefore, that Philippine company is forced to pass those transportation costs increases to the mattress manufacturer or lose money. The mattress manufacturer has no choice but to increase its prices or go out of business. And there’s no way to know if those mattresses will even sell at those higher prices.

It’s a dilemma of never-before-seen proportions.

Transportation

As seen in the second example above, transportation disruptions are at the heart of the problem. If the product can’t be moved from point A to point B in a timely fashion at predictable and reasonable costs, everything will eventually grind to a halt. Companies will go out of business. Unemployment will rise, and purchasing will decline. The economy will spiral downward at an alarming rate.

In Summary

There is no single culprit on whom to place the blame. Supply chain disruptions are perilous, and they impact every entity at every point in the chain:

  • Manufacturers
  • Distributors
  • Importers
  • Exporters
  • Shipping Companies
  • Freight Companies
  • Wholesalers
  • Retailers

And of course:

  • Consumers

Basileia Can Help

Supply Chain Management (SCM) software won’t alleviate every problem, and SCM software doesn’t control shipping rates. But it can help you mitigate risk, streamline your processes, and use predictive insights and intelligence from A.I. (Artificial Intelligence) and the IoT (Internet of Things) across planning, production, inventory, warehouse, and transportation management to maximize your company’s operational efficiency, product quality, and profitability.

Read more about Supply Chain Management in Microsoft Dynamics 365 Business Central.

Then take the next step. Contact Basileia Consulting Group (BCG) by calling 949-329-3524 or via our contact form so we can get acquainted!

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