What is causing massive disruption to the US supply chain?

As the U.S. economy struggles to fully recover from the coronavirus pandemic, supply chain disruptions across the country are pushing up prices and leading to a growing shortage of goods.

Supply chain bottlenecks – around the world – have caused record shortages of many products that American consumers are used to having readily available, from housewares to electronics to automobiles.

Moody’s Analytics warned that the problems “are likely to get worse before they get better.”

“As the global economic recovery continues to accelerate, what is increasingly evident is how it will be hampered by the supply chain disruptions that are now appearing around every corner,” wrote Moody’s in a report.

Here’s how the experts answer some key questions:

What is causing the disruption?

Analysts say the lingering effects of COVID-19 mitigation strategies have essentially reduced the production of goods and services, and the supply chain shortages that are currently occurring are the result of struggles to return to low levels. ‘before the pandemic.

“The result of this imbalance between supply and demand has wiped out all inventory and removed all the grease that keeps the cogs of commerce working properly,” said Steve Ricchiuto, chief US economist at Mizuho Securities.

Not enough warehouse workers, truck drivers

Economists believe several factors are contributing to supply chain shortages, including an increasing number of workers leaving their jobs, the key to making things work.

A record 4.3 million Americans left their jobs in August, a record since the Department of Labor began tracking data in 2000.

“You have a bunch of industries that only pay minimum wage and the workforce is just going to veer where it finds the most profit,” said Vidya Mani, associate professor at the Darden School of Business. University of Virginia.

The Labor Ministry reported in July that the warehouse industry had a record 490,000 job openings. Companies like Walmart, Target, and Amazon are going all out to attract warehouse workers with great perks, including free tuition.

With inflation nervousness growing, many large retail employers are raising their wages to keep up with rising prices, stepping up competition among companies to make their job openings the most attractive amid the rush. before the holidays to hire workers.

The American Trucking Association estimated in 2019 that there would be some 60,000 driver shortages, but those shortages have increased due to retirements and new truck drivers needing training due to COVID-19 closures.

“There is a shortage of drivers, and this is one of the many issues that contribute to global supply chain problems,” said Sean McNally, an ATA spokesperson. “However, this reflects the high demand for goods – and everything consumers buy is delivered in a truck.”

At the same time, economists say large employers preparing to bring their staff back to work in greater numbers had led to large purchases of bulk items.

What shall we do now?

Supply chain experts say the best option for consumers right now is to wait and start reducing their demand for goods, or they could end up paying a higher price once those products are sold. long-awaited will be available.

“It’s good to be aware that when we are shopping, whatever we order is going to land at some point,” Mani said. “We’re seeing these immediate shortages and we’re continuing to order and order. A lot of these consumer goods companies are just going to pass these price increases on to you.”

The Biden administration has made a concerted effort to try and close supply chain gaps and pushed the president’s infrastructure plan as a way to address systemic supply chain issues. President Joe Biden has announced that the Port of Los Angeles will begin 24/7 operations to ease bottlenecks ahead of the holiday season.

“Strengthening our supply chains will continue to be my team’s goal,” Biden said. “If federal support is needed, I will lead all appropriate actions, and if the private sector does not step up, we will call them and ask them to act.”

But experts believe unraveling supply chain issues could take much longer.

How long before things get back to normal?

“We’re waiting at least four to six months for this to take a break,” said Nick Vyas, executive director of the Kendrick Global Supply Chain Management Institute at the Marshall School of Business at the University of Southern California.

“So I think we’re going to have to get through the high seasons with these bottlenecks, and although the bottlenecks may actually move from the ports inland, but the delay is, I plan to continue during the holiday season. “

Supply chain disruptions at the onset of the pandemic, which caused months of shortages of PPE, including N95 respirators, gloves, cleaning supplies and other hospital intensive care equipment, put nearly a year to resolve.

The federal government, particularly FEMA, lacked clear guidelines on how to distribute supply to states, which resulted in an oversupply of goods in some parts of the country, while others experienced severe shortages.

Although the supply crisis is pushing up prices, companies now have an opportunity to start finding solutions, given the vulnerabilities that the recent supply chain crisis has exposed, including worsening traffic congestion. cargo ships in the world’s busiest ports.

Gooten, a US-based supply chain company, helps brands and retailers use on-demand manufacturing to grow their retail and e-commerce businesses globally.

Firms that use on-demand production only start producing products once they are purchased by a consumer, instead of predicting what the demand for a product might be, and then producing a set number of those products. products.

“We have to start that same model of just-in-time manufacturing with everything we produce, whether it’s clothing, wall art, household items, toys, we just have to change the way we do business. think, “said Mark Kapczynski, director of marketing at Gooten.

“If you’re a retailer or a brand and you’ve got ten thousand pieces, let’s say t-shirts, sitting on a box in a boat, how do you sell something? ” he said.