2021–2022 global supply chain crisis
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In 2021, as a consequence of the
COVID-19 pandemic The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identif ...
, global supply chains and shipments slowed, causing worldwide shortages and affecting consumer patterns. Causes of the economic slowdown included workers becoming sick with COVID-19 as well as mandates and restrictions affecting the availability of staff. In cargo shipping, goods remained at port due to staffing shortages. The related global chip shortage has contributed to the supply chain crisis, specifically in the automobile and electronics sectors. During the
Christmas and holiday season The Christmas season or the festive season (also known in some countries as the holiday season or the holidays) is an annually recurring period recognized in many Western and other countries that is generally considered to run from late November ...
of 2021, an increase in spending in North America, combined with the spread of the
Omicron variant Omicron (B.1.1.529) is a variant of SARS-CoV-2 first reported to the World Health Organization (WHO) by the Network for Genomics Surveillance in South Africa on 24 November 2021. It was first detected in Botswana and has spread to become the ...
of COVID-19, further exacerbated already tight supplies. Long tail effects of the supply chain crises are contributing to ongoing food security issues related to the pandemic, including the
2022 food crises 2022 saw a rapid increase in food prices and shortages of food supplies around the world. The compounding crises in distinct parts of the world were caused by compounding geopolitical and economic crisis. The crises followed food security a ...
.


Causes

In early 2020, the
COVID-19 pandemic The COVID-19 pandemic, also known as the coronavirus pandemic, is an ongoing global pandemic of coronavirus disease 2019 (COVID-19) caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2). The novel virus was first identif ...
initially slowed the global supply chain as manufacturers suspended work until safety precautions were enacted. Despite rosy forecasts from businesses for the next year, global trade continued at a reduced capacity and did not fully recover. New challenges in 2021, including the
Delta variant The Delta variant (B.1.617.2) was a variant of SARS-CoV-2, the virus that causes COVID-19. It was first detected in India in late 2020. The Delta variant was named on 31 May 2021 and had spread to over 179 countries by 22 November 2021. The ...
and reduced access to the COVID-19 vaccine in developing countries, further exacerbated the recovery of global production even as the economies of wealthier, vaccinated regions, such as the United States and Europe, resumed their patterns of consumption. Vietnam, for example, is a major provider of American apparel. The country worked through the pandemic in 2020, with a strict lockdown procedure, but outbreaks in 2021 forced many manufacturers to close, especially as workers remained largely unvaccinated. To sustain production in 2021, the Vietnamese government required workers in higher-risk regions to live at their workplace. Economists pointed to
lean manufacturing Lean manufacturing is a production method aimed primarily at reducing times within the production system as well as response times from suppliers and to customers. It is closely related to another concept called just-in-time manufacturing ( ...
(also known as "just-in-time" manufacturing) as a major source of the supply chain disruption. The lean manufacturing method relies on well-tuned matching between the raw material input and finished good output of production facilities to minimize the amount of products stored in warehouses and thereby save money on overhead costs. It is notably weak to unexpected shifts in demand because it requires extremely accurate demand forecasting to achieve the savings and
economies of scale In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables ...
that are its main benefits. When the COVID-19 pandemic began to shut down manufacturing facilities, it set off a chain reaction of disruption to the many companies which adopted lean principles in their production pipeline. Later, as demand skyrocketed for consumer goods and medical supplies like personal protective equipment (PPE), these same facilities were unable to keep up with demand, leading to massive backlogs. These disruptions cascaded into the global
shipping industry Maritime transport (or ocean transport) and hydraulic effluvial transport, or more generally waterborne transport, is the transport of people (passengers) or goods (cargo) via waterways. Freight transport by sea has been widely used throug ...
where ports like the
Port of Los Angeles The Port of Los Angeles is a seaport managed by the Los Angeles Harbor Department, a unit of the City of Los Angeles. It occupies of land and water with of waterfront and adjoins the separate Port of Long Beach. Promoted as "America's Port", t ...
, a major hub for imports from Asia, are unable to clear their shipyards in a timely fashion, further exacerbating the supply chain crisis. This has led to suggestions that stockpiles and diversification of suppliers should be more heavily focused.


Shipping

By mid-2021, major American ports became inundated with historic amounts of inbound cargo. Terminal staff lacked the bandwidth to process the cargo, leading to extended wait times. Container ships began to stall outside ports for days or weeks. This surge spread inland as rail and trucking services struggled under the increased load alongside a labor shortage. The United States trucking industry was already short on drivers before the
pandemic A pandemic () is an epidemic of an infectious disease that has spread across a large region, for instance multiple continents or worldwide, affecting a substantial number of individuals. A widespread endemic (epidemiology), endemic disease wi ...
, with high turnover and subpar compensation. Though enough
shipping container A shipping container is a container with strength suitable to withstand shipment, storage, and handling. Shipping containers range from large reusable steel boxes used for intermodal shipments to the ubiquitous corrugated boxes. In the context of ...
s exist to handle global needs, given the amount held in transit or misplaced in wrong parts of the supply chain, containers entered short supply. Additionally, half of the sailor population comes from developing, under-vaccinated countries.


Effects

Large American retailers chartered container ships in early preparation for the holiday season. Container shipping companies were encouraged to develop and innovate technology-driven processes in shipping to achieve external influence free shipping. On October 17, 2021,
United States Secretary of Transportation The United States secretary of transportation is the head of the United States Department of Transportation. The secretary serves as the principal advisor to the president of the United States on all matters relating to transportation. The secre ...
Pete Buttigieg Peter Paul Montgomery Buttigieg ( ; ; Sometimes pronounced or , but not by Buttigieg himself. born January 19, 1982) is an American politician and former military officer who is currently serving as the United States secretary of transp ...
predicted that the crisis would "certainly" extend into 2022. In November, the Chinese Minister of Commerce advised citizens to stock food supplies for the winter. According to a November 2021 report from Adobe Digital Insights, online shoppers were met with more than 2 billion out-of-stock messages in October 2021, which was double the rate reported in October 2020. In the United States the list of products that are in short supply included
electronics The field of electronics is a branch of physics and electrical engineering that deals with the emission, behaviour and effects of electrons using electronic devices. Electronics uses active devices to control electron flow by amplification ...
,
jewelry Jewellery ( UK) or jewelry (U.S.) consists of decorative items worn for personal adornment, such as brooches, rings, necklaces, earrings, pendants, bracelets, and cufflinks. Jewellery may be attached to the body or the clothes. From a western ...
,
clothing Clothing (also known as clothes, apparel, and attire) are items worn on the body. Typically, clothing is made of fabrics or textiles, but over time it has included garments made from animal skin and other thin sheets of materials and natural ...
, pet supplies and home and garden items. As the world economy has struggled to regain its footing amidst the events of the past few years, Chinese exports have skyrocketed in the global market, rapidly increasing production to cover the quickly-rising global demand. In just one year, China's trade surplus with the US alone rose to $335.5 billion in 2021, up from $308.1 billion in 2020. The supply chain crisis is a major contributing factor in the 2022 United States infant formula and the tampon shortage.


Future prospects

In December 2021, CEOs of major automotive manufacturers and electronics makers said they expected the shortage of semiconductor chips to continue through the first half of 2022. Sales in
India India, officially the Republic of India (Hindi: ), is a country in South Asia. It is the seventh-largest country by area, the second-most populous country, and the most populous democracy in the world. Bounded by the Indian Ocean on the so ...
fell approximately 20 percent in 2021 due to the shortage of chips and the amount of light vehicles lost to shortages was half a million vehicles. In February 2022, Peter S. Goodman, writing in ''
The New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...
'', argued that returning to the pre-COVID-19-pandemic global supply chain was seen as "unlikely" in 2022. India, the United States, and Brazil are hardest hit in the supply chain with significant shortages of many different product categories. Interruptions in the supply chain have proved particularly difficult to overcome and control, which has put these countries at a disadvantage in global trade. Particularly affected by the loss are regions where there are challenges to democracy or human rights issues. China, like India, stood out as one of the losers in the battle for the supply chain. In addition to the impact of COVID-19 on supply chains around the world, the conflict between Russia and Ukraine has also had a major impact on the product supply crisis. It will affect the global economy and trade, with Russia and Ukraine accounting for more than 25% of world wheat trade and more than 60% of global sunflower oil and 30% of world barley exports. It will have an impact on the global supply chain as Russia is a significant source of 35 critical minerals vital to the United States' economic and national security interests, including 30% of the global platinum supply of 13% titanium and 11% nickel. A factor that will also leave its mark on the supply chain is the global inflation rate. In 2021 it was projected to reach an inflation rate of about 4% to 5% percent but exceeded expectations and the global inflation rate ranges from 7% to 8% currently (June, 2022).


See also


References


Further reading

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