Supply Chain Bottlenecks
Supply chain bottlenecks are currently causing major issues across the globe. Slow movement of goods is resulting in costly delays and empty shelves for retailers. These delays are acting as a drag on the global economy at a time when the world is trying to recover from the COVID-19 pandemic. Let’s investigate the cause of these delays and how some companies are reacting to the global supply chain bottlenecks in 2021. We’ll also review some of the action’s governments are taking to solve the bottleneck issues.
What is the Supply Chain?
The supply chain is the network of companies that bring goods from the manufacture to the consumer. This includes delivery trucks, planes, trains, cars, buses, and vessels. Anything that is involved in the movement of goods from the origin to the destination. For example, a shipment of stuffed animals from a factory in Qingdao, China gets on a truck from the factory to the ocean port and then on to a vessel. From there, the vessel docks in Vancouver, and the shipment is loaded on a train where it gets to a Toronto terminal. A truck then takes it from the train terminal to the retailer where it gets on the shelves for consumers to purchase. The supply chain is global, it is integrated, and it is organized.
Why are Bottlenecks Occurring?
Analysts say that strains in the supply chain were showing prior to the pandemic. The boom in online shopping has increased international shipping demands, however once the pandemic started, things quickly deteriorated. Various countries instituted measures to combat the spread of COVID-19. Factories and ports in China were forced to close in the event of a positive case of the virus. In Canada, non-essential factories were closed for a period, due to government lockdowns. Re-opening these production facilities does not happen as quickly as shutting them down. Labour shortages at ports around the world slowed the loading of vessels. Lack of shipping containers in one part of the world due to delays on other ends of the supply chain contributed as well. The pandemic has infected the global supply chain and resulted in bottlenecks across the globe.
How Companies are Coping
There are not many alternatives to ocean freight available to companies that need to move large amounts of goods. Air freight is more expensive, and the capacity does not match a container ship. Big companies like Home Depot and Ikea have taken to chartering their own vessels to bypass some of the delays. Ikea states that their North American stores have been hit the hardest with product shortages. The fact that companies are going to this extent shows how dire the situation currently is. The sheer size of these companies allows them the ability to undertake such costly initiatives. Small and medium size businesses don’t have these options available to them.
What Happens Next?
Governments are reacting in various ways to combat the supply chain bottlenecks. Canadian Deputy Prime Minister and Finance Minister Chrystia Freeland recently told reporters that the Canadian Government is monitoring the supply chain and Canadian ports. She also noted the issue was discussed at the G7 and G20 meetings. United States President Joe Biden signed an executive order which increased the hours at 2 of its largest ports. The Port of Long Beach and the Port of Los Angeles move 40 percent of the goods imported into the US. They will now operate 24/7 instead of just Monday to Friday. While production and shipping are starting to normalize after the shocks incurred by the COVID-19 pandemic, some analysts project the supply chain bottlenecks to last through 2022.
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