Holiday 2021 Rings-In A Supply Chain Calamity
The busiest retail season of the year is officially here, and the images capturing the expected cheer are now videos of cargo ships off the coast of California. These ships contain appliances and other high-tech gifts awaiting delivery. But sadly, the massive global supply chain shortage is impacting just about every industry, from cars and appliances to toys and apparel.
Consumers and business owners across the United States are bewildered and struggling to stay afloat as these ships represent sinking supplies, sales, and consumer confidence. Here are the reasons for these supply chain issues, which unfortunately are another long-haul symptom of the coronavirus.
The Supply Chain Crisis In A Breaking Nutshell
The two primary reasons for the current supply chain issues are no end in sight and no estimations of when products will arrive. This lack of information is frustrating for consumers, business owners, and other suppliers as they deal with sales they can’t fulfill and angry customers.
How The Supply Chain Calamity Came To Be
Like any traffic jam, multiple collisions are leading to the current supply chain issues. Many of the factors contributing to this matter are post-pandemic mayhem. Below outlines the specifics around each aspect leading to unexpected hold-ups and frustrations.
1. COVID-19 is the most apparent reason for manufacturers around the globe to shut down for months on end. And the trickle-down effect from these immediate halts on production and distribution is now negatively impacting warehouses. These storing facilities are open, but they are not functioning at capacity due to Covid protocols and staffing issues. So, we have a major decrease in supply.
2. Economics 101 outlines the reason for continued bottle ups as with supply way down; demand is soaring. In addition, consumer spending increases surged even while Americans were working from home and social distancing. The pandemic consumer demand in the U.S. is equivalent to 50 million new people joining the economy. This increase in demand and decrease in supply creates the perfect storm.
3. With all this spending, there is a decrease in supply chain capability due to fewer workers, equipment, and storage. Statistically, there is a 30% increase in goods going through U.S. ports with 28% fewer workers. And there are nearly 600,000 job openings in the country for warehouse and trucking jobs.
Why There Are So Few People Filling A Wide Open Job Market
It is hard to comprehend the lack of employees available to fit the many job opportunities available in nearly every business niche across the nation. Again, many of these job issues are a result of COVID.
One major happening is individuals retiring early. And with so many job openings, a lot of manual laborers experience promotions to less physical work.
Another reason for the lack of people working is due to unmanageable workloads and deadlines. And some individuals are unable to work due to federal vaccination mandates in conflict with their personal health decisions.
Last and hardly least, many people continue to make more money on the United States’ accommodative unemployment policies. These individuals have no incentive to work, which furthers the desperate need for employees in an open job market.
More Money From The Government Increased Demand
Contributing to the increasing demand during the pandemic is the Federal Reserve’s offering significantly lower interest rates and money lending very attractive. This increase in cash flow created an unexpected rise in people’s liquidity and ability to purchase significant consumer goods such as cars and household appliances.
Now Let’s Address The Toilet Paper Hoarding
At the onset of the pandemic, it seemed almost comical that Americans stockpiled simple household items, including toilet paper and toothpaste. Suppliers accumulated an abundance of goods for their stores to meet the demand of these consumer purchases. This merchant hoarding created a more significant backlog as manufacturers were filling phantom orders.
Computer Chips Are In Greater Demand Than Potato Chips
To compound matters surrounding the supply chain issue is the massive demand for computer chips from manufacturers like Taiwan Semiconductor. Many products these days require semiconductor chips, including cars, computers, and appliances. And with only a few companies in the marketplace producing these now highly coveted electronic necessities, there are currently 10’s of thousands of Ford F-150’s missing the key ingredient, microchips!
To summarize the supply chain crunch, demand is soaring, manufacturers are frantically attempting to produce, there are not enough workers or storage, and even when a product is ready, they are now waiting on chips.
When Does The Supply Chain Quicker-Fixer-Upper Come To Play?
The answer to rectifying the supply chain issue is twofold. One is to increase the cost of goods which is why Social Security raised their Cost-of-Living Adjustment (COLA) for next year by an astonishing 5.9%.
An example of COLA is that before the pandemic, it cost around $1,400-$2,000 to ship a container from China to the U.S. Today, the exact shipping container costs $20,000-$25,000, and consumers will be the ones to pay for these inflated costs.
The second area to focus on is the timing for when supply and demand will normalize. Experts in economic inflation suggest that the supply chain will balance out by late 2022 or even 2023. So, fasten the seatbelt of the immobile F-150 as there is more than a year ahead to ride out this crisis.
So, if remodeling the home or purchasing a new appliance, expect a delay. By the time demand decreases and supplies increase, the older models may be back in vogue. In the meantime, consult a trusted financial advisor to plan for the future in a manner that provides wealth, health, and happiness.
This post first appeared on Forbes.
