The COVID-19 pandemic left one destructive issue that we’ll all have to deal with for years to come— disruptions to global supply chains. 

The rollout of the vaccines prompted the start of the recovery of the global economy from the major slump caused by the pandemic. But, the global supply chain’s road to recovery is still nowhere in sight. 

As the saying goes, a chain is only as strong as its weakest link. And when it comes to the current global supply chain, weakness is everywhere. 

In 2020, the coronavirus led to the implementation of lockdowns worldwide, wreaking havoc on the global supply chain. Across a spectrum of industries, consumer demand surged and manufacturers couldn’t keep up. It only worsened when ocean carriers cancelled sailings, manufacturing capacity was cut, and displaced workers increased.

A year later, sailings are still struggling. However, instead of cancellations, it’s keeping up with demand that is causing problems. In fact, the freight shipping industry has been especially volatile. Shipping containers went as high as 4 times the price they were just over a year ago. In the US alone, there was a 30% increase in goods passing through ports. 

As a result, the supply chain crisis created what we call an ‘everything shortage.’

The ‘Everything Shortage’

Last year, the big shortage was toilet paper. This year? It’s everything. 

With the limited supply of raw materials and products, ordering goods will likely cost you more or have an extended lead timeーfrom chicken wings to cars.  

The shortage of goods directly results from shortages in labour, warehouses, ports, and trucks. However, the increased global spending also didn’t help. In 2020, global consumers spent over $4.2 trillion online for services and goods. Amid the pandemic, e-commerce sales surged—and will likely continue to increase year on year. 

Because of this, ports, warehouses, and trucking companies are transporting more goods than ever. But the problem doesn’t end there. These industries are also battling shortages in human resources, equipment, and space. 

The 3 key factors affecting our current crisis are a lack of labour, lack of space, and old-school principles that have prevented the supply chain from recovering quickly. So, let’s explore each of these factors more in-depth. 

Labour Shortage

This year, data shows that 77% of the most influential ports worldwide experienced above-average waiting timesーhow long it takes for cargo ships to enter and unload. The longer waiting time is also due to the shortage of drivers in the trucking industry. The trucking industry is short of 80,000 drivers—a 30% increase from pre-pandemic. Also, the US Labor Department records 490,000 openings in the warehouse and transportation industry last July. 

Apart from that, the labour shortage in manufacturing facilities also adds to the burden as it hinders fast production. A year after the pandemic started, the manufacturing industry in the US finds it hard to fill over 500,000 positions for manufacturing employees. With this, the current workforce has to fill labour gaps by doing more hours—but they can only do so much. As a result, companies are missing production deadlines due to labour shortages.  

Even supply chain giants, like Amazon and Apple, say they’re feeling the pressure of the lack of workforce. Amazon said it could lose its entire 2021 fourth-quarter profit due to high labour and fulfilment costs. The same goes for Apple which lost $6 billion in sales because it couldn’t produce enough products to meet consumer demand.

With fewer workers and truck drivers to process and deliver goods, warehouses and ports are quickly running out of space. 

Not Enough Space

As more people purchase goods and companies import more products, industries demand more space to store their stocks. The result? Well, the lack of space for businesses continues to pose a threat to the supply chain. 

Imports in the United States further increased in 2021, with New York and New Jersey ports recording a 26.4% growth compared to last year. Because of this, companies need more storage to accommodate the inflow of goods.  

In the UK, businesses also face the risk of running out of warehouse space. Currently, available warehouse space is below 50m sq ft—the lowest level since 2009.  

A concrete example of this is the commercial real estate and logistics giant Prologis. The company’s average warehouse occupancy rate continuously goes up, recording 96.6% in the third quarter of 2021. As of September 30, Prologis has already leased 98% of its properties.

To combat this, supply chain managers are considering sourcing for more space in other regions or countries. Doing this allows businesses to minimise the risk of loss due to a lack of warehouse space. Especially when the increasing demand for industrial space resulted in higher rates. In 2021, 61% of warehouse operators in the US raised their prices. 

Disadvantages of Lean Principles 

Finally, the traditional supply chain principles are also causing the current global supply chain crisis. The long-term solution to address the disruptions caused by the COVID-19 pandemic would be to do the following: 

  • Building new infrastructure that can handle more inventory and provide more industrial space
  • Improving technology to enable digital transactions and hasten communication

However, we need an immediate fix to the problem to mitigate losses and ensure continued operations. But, as most parts of the supply chain are built on lean principles, it cannot handle immediate increase in operations.   

Lean Principles means eliminating all unnecessary processes in the supply chain to reduce redundancy and increase efficiency. It affects everything from truck drivers to inventory management. But, as its system works on a reliability and predictability methodーit provides a great disadvantage given the uncertainty brought by the pandemic situation. 

For example, the demand for consumer goods can fluctuate and change in a matter of months. But, increasing port capacity, building warehouses, and hiring more employees to meet the demand will take a more significant amount of time to recover. 

Because of these issues, the world is still battling the 2020 global supply chain crisis this year. The domino effect brought by the sudden surge of customer spending and implementation of lockdowns only continues to cause issues globally. 

Agility and Decentralisation as a Solution 

The global supply chain crisis is one thing that we continue to experience a year after the disruptions caused by the pandemic. But, based on the issues that we are currently confronted with, a long-term fix would be to integrate more agile technologies into your operations.    

Another solution is to decentralise your sourcing needs to address shortages in the supply chain. As mentioned above, this means looking for new regions and countries capable of supplying your demands, such as more warehouse capacities and storage. 

There’s still no end in sight for the current global supply chain crisis. And so, supply chain managers and companies will have to start thinking long-term when it comes to ensuring continued business operations. You need to start strengthening your supply chain by integrating new ways to overcome the global supply chain crisis. Once you do that, you’ll be able to adapt and ensure your company keeps running—even at the worst of times. 

Our team at Good for Life helps you employ agile technologies and decentralise your sourcing needs. Contact us today!