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In recent years, the supply chain has become more integrated and globalized as global interconnectedness and production have created more market efficiency. The supply chain is the network between a company and its suppliers to produce a specific product or service. The global supply chain allows for the interconnected flow of information, resources, and processes worldwide. However, the COVID-19 pandemic has been a significant factor that led to a supply chain crisis, when there was greater demand for products that could not be fulfilled, due to the slowdown of supply chains. Given the supply chain crisis, supply has not kept up with the increasing demand for certain products. Currently, the major effects of the supply chain crisis are a global shortage of materials, shipping and transportation delays, and staff shortages. The problems of the supply chain disruptions do not appear to be going away any time soon. For these reasons, increased investment of companies to manage their supply chains should bolster the efficiency of global supply chains.
Shortage of Materials
The shortage of semiconductors has been a significant problem for several industries since the beginning of the COVID-19 pandemic. Demand for chips has been on the rise since the pandemic, given that consumers increased their use of laptops, 5G phones, and gaming. However, the pandemic slowed down manufacturing, which led to a shortage.
Additionally, the automotive industry has been significantly hurt by the semiconductor shortage. Semiconductors are used for vehicle control, power management, and safety features, among other things. Major automakers such as General Motors and Ford felt the heat of the shortage, resulting in reduced vehicle production. While Toyota did not initially face the consequences of the disruption, it is now not expected to meet its annual production of 9 million vehicles by the end of the fiscal year 2022. These companies may consider increasing their investment in components such as chips to avoid huge losses.
Staff Shortages
There are fewer workers in the labor market, which is specifically impacting the output of small businesses. Factors contributing to the scarcity of workers include staff burnouts due to the continuation of the pandemic as well as a shortage of qualified labor. Additionally, COVID-19 infections led to staff shortages, causing greater supply chain disruptions and limiting economic growth and investment. Shortages of labor, which exacerbate supply chain disruptions, are a threat to profit margins. Therefore, companies need to increase their investment in labor to avoid facing greater ramifications of supply chain disruptions.
The shortage of truck drivers plays a crucial role in disrupting the supply chain. Before the pandemic, there was already a shortage of truck drivers. The shortage has worsened since the onset of the pandemic. Without truck drivers, goods cannot get from ports to warehouses and then get to retailers and consumers. Consequently, truck drivers are taking on extra hours. As a result, business owners are making changes to compensate for the labor pressures, such as offering more part-time hours and increasing wages to attract employees.
Transportation Delays
Due to the lack of workers and facilities, transportation and shipping delays are yet another effect of the supply chain disruption. Shipping problems have made importing necessary supplies and exporting goods even more difficult.
During the holiday season, supply chain challenges made it difficult for consumers to receive gifts on time. The huge spike in demand for products, particularly those coming from China, caused cargo ships to have to wait to unload shipping containers, leading to a backlog. The result is that retail companies often might have a product online but not in their storefronts or vice versa.
The Bottom Line
The COVID-19 pandemic has exacerbated disruptions in the global supply chain that have led to significant effects worldwide. These problems involve shortages of certain materials, staff shortages, and transportation delays.
For instance, there has been an increased demand for certain products and materials, such as items that require semiconductor chips. However, the supply has not kept up with the rise in demand. The shortage has led to supply chain disruptions in the automotive industry, gaming industry, and technology sector. Furthermore, the pandemic has been a catalyst for staff shortages, particularly among truck drivers. As a result, the supplies are not moving as quickly between manufacturers and retailers to get to consumers. Finally, these transportation delays have been reflected in the backlog of products during the holiday season and missing products in grocery stores.
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