The global supply chain is in hot water. The pandemic has made it notoriously difficult for shoppers to buy certain consumer goods, from home appliances and furniture to laptops and bicycles. And things aren’t getting better anytime soon, at least not this year. Shipments have been delayed, raw materials are in short supply, and businesses have scrambled to dole out apologies and assurances to anxious customers.
With the holidays a few months away, experts are predicting that the year’s busiest shopping season will be “a perfect storm” of supply chain bottlenecks. Shoppers, as a result, will face higher prices, even as retailers remain uncertain as to whether they can keep up with demand.
“This year, Christmas will be very different,” said Steven Melnyk, a professor of supply chain and operations management at Michigan State University. “We won’t see as many blowout sales leading up to the holidays, and prices are going to go up.”
The back-to-school season typically offers retailers a glimpse into consumers’ shopping patterns, but the delta variant has thrown a wrench into businesses’ hopes for an economic return to normalcy. Melnyk thinks customers will approach holiday shopping differently if they continue to face product shortages. More people will shop from brick-and-mortar stores given the uncertainty of online orders, and gravitate toward goods made in the US: “Shoppers will be focused less on price, and more on availability of the items they want.”
Here is an incomplete list of consumer goods that have been subject to backorders, delays, and shortages: new clothes, back-to-school supplies, bicycles, pet food, paint, furniture, cars, tech gadgets, children’s toys, home appliances, lumber, anything that relies on semiconductor chips, and even coveted fast-food staples like chicken wings, ketchup packets, Taco Bell, Starbucks’ cake pops, and McDonald’s milkshakes (in the UK, for now).
Today, the circumstances are no longer as dire as, say, the indelible toilet paper shortage of 2020, when big-box retailers rationed the number of rolls customers could buy. Companies like Coca-Cola have had time to nimbly adjust and manage their stock, so the most high-volume, in-demand items can remain on shelves. Yet, the supply chains that drive the global economy will likely remain vulnerable to delays until 2022 or 2023, according to experts, or until most of the world is vaccinated. Here’s why.
The implications of a global supply chain
Supply chains are global, made up of factories, processing centers, and shipping companies all over the world. Companies and industries have spent years — if not decades — fine-tuning them for maximum efficiency and maximum profit. To understand the size and scope of this global manufacturing system, it’s helpful to look at how individual products are made. As Hilary George-Parkin has previously reported for Vox, behind every sold-out product “there’s a vast supply chain linking raw materials to factory floors to distribution centers.” The pandemic has created a ripple effect in this system that often leaves, quite literally, minimal room for error, since companies rarely stock up on excess inventory. As a result, over a year later, businesses and suppliers are still grappling with the fallout.
American shoppers — and the companies that sell us stuff — have long grown accustomed to convenience, partly made possible by lean, “just in time” manufacturing. This production model was first used by the Japanese to build Toyota vehicles in the mid-20th century and was emulated by companies around the world. The premise of the just-in-time model is cost-efficiency, which means companies hold onto relatively little inventory or parts themselves. Instead, they rely on suppliers. To make a product, businesses look overseas for suppliers who can source raw materials and assemble components, sometimes in various locations, where labor and the cost of materials are cheaper. After a lengthy production process, the finished product is imported to warehouses and distribution centers before it’s shipped to the final destination.
Historically, this production model has been a win-win for consumers and businesses — provided that nothing goes wrong. Companies are able to reduce inventories, cut costs, and deftly adapt to changing market demands, all while keeping prices low. But now that disruptions are affecting every step of this supply chain, there’s no quick-fix solution.
The coronavirus outbreak sent the global supply chain into an unprecedented slowdown at the start of 2020, as the virus made its way through China, Europe, and then the US. Manufacturers put thousands of factories on pause until Covid-19 safety policies were put into place. While supply chains didn’t fully recover from the initial shock, companies were optimistic heading into 2021. But the delta variant — and the lack of vaccine access in low-income countries — has prolonged the timeline for global recovery.
Wrapping up
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