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Supply chain crisis update: how it’s unfolded, why it’s still going on, and what is being affected

As Christmas is fast approaching, it seems, like the lingering smell of turkey on Boxing Day, that the supply chain crisis is here to stay.

What many thought would be a temporary blip as the global economy started to wind back up again coming out of the pandemic has proven to be a longstanding and contentious political issue, impacting the lives of most Americans, especially going into this festive period.

In fact, the situation appears to be as dire now as it has ever been, which makes it a fitting moment to pause and assess how the chaos has come to unfold like it has, and what aspects of life are being most affected.

It is difficult to try and pin the cause of the crisis onto one single issue, because it has come about through a myriad of contributing factors, but ultimately the situation was offset, or at least exacerbated, by the Covid-19 pandemic.

As industry around the world ground to halt in 2020, and factories and stores closed for an indeterminable amount of time, naturally it was impossible to predict what would be the needs of the future. As is well documented, many companies laid off a lot of their workers in order to stay afloat.

But global consumer demand never exactly dropped off, only evolved, which left supply playing catch up to the new rules of the game.

Only now it had to contend with new labor shortages, travel restrictions, and different industries operating at different speeds, thereby limiting the availability of precious goods and materials.

This effect is well illustrated by the recent woes of the beverage industry, the latest in a long line of industries to suffer from shortages.

The ‘standard’ amount of stock shortage in grocery stores in recent months has been between 5 to 10%. When it comes to drinks, an average of 13% of stock is missing from the shelves today.

With Christmas parties just around the corner, you may struggle to pick up anything from water, to soft drinks, to alcohol – the supply chain crisis does not discriminate.

A dearth of bottles and cans is responsible for much of it, as factories struggle to meet increased and novel demands. But trucking and shipping impediments, missing ingredients and freak weather have all played their part.

Unfortunately, again, it is not just a single factor that can be addressed, and they are all interconnected.

Bill Creelman, of Spindrift Beverage Co., Boston, provided an example that illustrates the complexity of the issue rather well.

“When vaccines needed to be moved by refrigerated trucks, overnight refrigerated trucks were not available or were more expensive”, said the beverage boss.

“I’ve never seen a year where the overall effort is as high to get product out,” he added. Unfortunately too many variables, like the trucks, are simply out of the hands of hardworking people like Bill.

Even more alarmingly than not being able to enjoy your favourite cold beverage at Christmas though, is the shortages being experienced in pharmacies.

The Food and Drug Association (FDA) say there are around 111 different types of drugs on backorder, including antibiotics and prescription medication for heart conditions and cancer treatment.

According to a survey by the National Community Pharmacists Association (NCPA), 60% of pharmacies said they were struggling to keep shelves stocked amid supply chain disruptions. Meanwhile the FDA has said it ““continues to take steps to monitor the supply chain.”

NCPA CEO B. Douglas Hoey was not afraid to voice his view that this response doesn’t befit the severity of the issue, saying that “Policy makers in congress, the Biden administration” all need to do more.

“Independent pharmacies are the safety nets protecting their communities, and owners are working overtime… doing everything they can to answer the call,” Hoey added.

In fairness, Biden has made attempts to remedy the issue: he extended the operating hours at Los Angeles and Long Beach ports, two of America’s biggest ports, and reached out to major ocean carriers to offer a $100 reward each time a container is picked up.

Well-intended gestures certainly, but reports still emerged just last week that 25,000 containers are sitting at Charleston ports, including 2,000 that have been there for more than 30 days.

This is a concerning but timely insight into the nature of the crisis: measures can be taken to alleviate the pressure at one end of the chain (i.e. LA and Long Beach), but this will only shift it to a different point, at least as long as everyone is still playing catch-up.

And whilst we struggle to return to equilibrium, shortages are only likely to persist, and inflation to rise. For a number of months yet, according to reports.

However, there are positives to take away from this situation. The supply chain crisis has exposed what economists call our ‘just in time’ model of manufacturing. This is where companies stockpile as few raw materials and parts as possible, instead relying on being able to get what they need when they need it.

Perhaps this confusion and uncertainty offers an opportunity to move towards a more sustainable method of manufacturing. Following Amazon’s model of greater self-reliance when it comes to transport, say, might be a start of a new and better era of the supply chain.

Photo: Bloomberg

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