Logistics was one of the first industries hit hard when the global pandemic began. With instant lockdowns, quarantines and strict travel restrictions, the ability to store, move and distribute products became nearly impossible. Store shelves became empty, shipping containers piled up off the coast, and businesses struggled to find the supplies they needed to meet consumer demands.

Supply chain shortages across the globe rose by an astonishing 638% in just the first half of 2021. These disruptions forced business leaders to instantly adjust their supply chain processes and seek out new distributors and means of acquiring raw materials. Alternatively, organizations within the logistics industry worked hard to mitigate these supply chain disruptions for their clients.

Despite markets reopening and COVID-19 restrictions starting to ease, 73% of global business executives still rank supply chain shortages as one of their top concerns. If the supply chain crisis is impacting your organization, the first step to mitigating its impact on your company is to understand the causes behind it. Keep reading to learn more.

Man working on a manufacturing site.
Man working on a manufacturing site.

what is the supply chain shortage?

In short, supply chain is the process of producing and distributing products from a supplier to a company and then to the customer. A supply chain shortage occurs when one or more steps in this process are disrupted, which causes a delay in the delivery of products to the customer or makes it impossible to meet consumer demands.

Prior to the pandemic, most supply chain shortages only impacted one or two industries at a time or caused short delays. For example, in 2000, Firestone recalled 6.5 million tires due to safety concerns, which led to a temporary tire shortage in the United States. Alternatively, a national disaster could lead to a temporary shortage of supplies due to damages and factory shutdowns in those areas.

While many organizations invest in supply chain planning and forecasting, nothing could have prepared them for the disruptions caused by a global pandemic. This supply chain crisis impacted nearly every industry in every region of the world.

understanding the current supply chain crisis

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why is there a supply chain shortage?

Even before the pandemic hit, the supply chain was a complex process that included multiple steps and layers. Just one disruption in this process can lead to significant shortages. So, when the pandemic hit, many businesses were left unprepared.

While COVID-19 may be considered the catalyst of the current supply chain crisis, that’s much too broad of a topic to fully explain the current issues. There are several reasons spurring the ongoing supply chain disruptions.

travel restrictions

China is responsible for producing nearly 29% of all global products. So, when it was the first country to face travel restrictions, the impact on the supply chain was noticed almost instantly. This caused a ripple effect throughout the world as organizations struggled to find new suppliers to meet demand. Brexit, which took effect less than two months prior to the start of the pandemic, also impeded the movement of both product and talent throughout Europe.

Cargo ships were literally unable to dock to offload goods and trucks were stopped at the borders with full loads. With globalization at an all-time high, the lack of international trade disrupted supply chain processes in nearly every industry throughout the world. These disruptions also significantly impacted many businesses’ ability to obtain the materials necessary to meet their production demands.

While borders are now reopening and international trading is inching towards pre-pandemic levels, businesses are still experiencing supply chain shortages and delays due to border controls. While some of this is likely to ease with time, it could take years to reestablish some of these broken supply chains.

talent shortage

The ongoing talent shortage combined with the growing skills gap certainly plays a role in the current supply chain crisis. Having the right workers in the right roles is critical for supply chain efficiencies.

At the onset of the pandemic, quarantines and shutdowns led to a loss of 114 million jobs in 2020 alone. While COVID-19 restrictions are starting to subside and markets reopening, employers are still struggling to acquire and retain the talent they need.

This talent shortage has its own set of unique causes including the aging population, continuing COVID-19 concerns, the great resignation and shifting workers’ demands. Despite the reasons, the lack of workers is significantly impacting organizations' abilities to mitigate supply chain disruptions.

For example, the United States has seen a labor shortage of 80,000 truck drivers. This problem isn’t limited to just the U.S. The International Road Transport Union reports that 20% of trucking jobs went unfilled across 20 Eurasia countries in 2021. Without truckers, the ability to move products between locations becomes even more challenging.

When it comes to the supply chain industry, filling vacant jobs isn’t an easy task. Not only are we dealing with an ongoing labor shortage, but many of these roles also require specialized skills and experience. For example, truck drivers must have the right licensing and experience. Alternatively, workers handling supply chain management must have experience in material planning and forecasting.

Additionally, the supply chain is more tech-driven today than ever before. Even production lines and warehouses are equipped with robotics and automation technology. For this technology to operate efficiently, organizations need tech-savvy workers. And not just software coding specialists and data analysts. They also require lower-level workers with technical skills and experience. Unfortunately, a recent study shows that only 1% of companies believe that they have the digital in-house talent they need.

limited inventory

As supply chain planning, management and forecasting have become more sophisticated and accurate over the years, businesses began incorporating a close to capacity supply chain business model. This means that many organizations store less on-site inventory. Instead, they depend on their complex supply chain network to deliver the supplies they need, when they need them.

Prior to the pandemic, this new business model worked fairly well, and organizations were often able to mitigate most supply chain disruptions. This model allows businesses to cut costs and improve workplace efficiencies without sacrificing quality or impeding the production process. However, when COVID-19 suddenly halted various stages of the supply chain process, some companies found themselves only days away from significant supply shortages.

The problem is that this type of business model requires accurate forecasting, which advanced technology allowed for up to this point. It didn’t, however, prepare organizations for a global pandemic or the level of supply chain disruptions it caused. This unpredictable global crisis also made future forecasting, at least during the pandemic itself, even more challenging.

Additionally, businesses that relied heavily on trade with national and international distributors found themselves stuck when shutdowns and travel restrictions hit. These organizations were forced to transfer to local and regional distributors, who were also strained trying to meet increased demands.

As a result, business leaders pledged to build more local and regional supply chain networks to protect themselves from future disruptions. According to one study, 38% of global businesses intended to regionalize their supply chain network. Despite this pledge, however, a follow-up study revealed that only 25% took steps to build a supply chain network that focused on local and regional suppliers. Instead, 61% of these businesses increased their on-site inventories.

This could be just a short-term solution because 90% of the businesses surveyed still have plans to regionalize their supply chain networks at some point in the future. This shift could be a golden opportunity for smaller, more localized businesses to fill in the gap.

Smiling man standing on a forklift.
Smiling man standing on a forklift.

global impact of ongoing supply chain disruptions

Ongoing supply chain shortages have impacted businesses across the world in a variety of ways, including:

who is affected most by these supply chain shortages?

Ultimately, everyone from producers and distributors to retailers and consumers are affected by the current supply chain crisis. However, the industries hit the hardest are those right in the midst of the supply chain network, including manufacturing and logistics, as well as retailers who depend on the delivery of goods.

For example, manufacturing is undeniably one of the hardest-hit industries. A delay in just one required raw material could halt production altogether. Today, many manufacturers aren’t dealing with just one supply delivery delay. Instead, they’re facing multiple supply chain shortages that are impacting several stages of the production process simultaneously. These companies are finding it difficult to meet staffing and production needs.

Here’s a look at several examples of how the current supply chain crisis is impacting businesses and consumers.

when will the supply chain return to normal?

While it may have taken mere days to see disruptions in the supply chain process due to the global pandemic, it’s going to take longer to repair these damages. Most experts agree that supply chain disruptions are likely to last throughout 2022, but the reality is that it could take years for these networks to be built back up to pre-pandemic levels.

The continuation of the talent shortage will certainly play a role in this recovery. If organizations can’t secure the talent they need to meet consumer demands, it could prolong supply chain recovery. Additionally, if suppliers can’t acquire the digital skills they need to implement new technology, it could take even longer to resolve some of the more complex supply chain issues.

If your company, like many across the globe, is facing challenges due to the supply chain shortage, the first step to overcoming these obstacles is to clearly understand the causes and effects of this crisis. Download our presentation on the supply chain crisis.

understanding the current supply chain crisis

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