I recently visited my local ski shop and they had hardly a boot, ski, goggle or pole to speak of – two full months before ski season begins. The owner said he’s normally close to fully stocked around this time of the year.
This may seem a little odd to some Americans given the U.S. has been living with the COVID-19 pandemic for over 19 months. Shouldn’t supply chains stressed by the onset of the pandemic have worked out their kinks by now?
As someone who conducts research and teaches on the topic of global supply chain management, I believe there are four primary – and interrelated – reasons for the continuing crunch. And unfortunately for many, they won’t be resolved by the holidays.
1. Consumer demand soars
When the pandemic first slammed into American shores in March 2020, companies were already preparing for a prolonged recession – and the typical resulting drop in consumer demand.
Retailers and automakers, many of which had to close due to lockdowns, canceled orders from suppliers.
But something strange happened by the end of the summer of 2020. After the initial shock, consumer spending began to rebound and was nearing pre-pandemic levels by September, in no small part thanks to the trillions of dollars in aid Congress was showering on the economy and people.
On October 10, 2021, NASA’s Advanced Spaceborne Thermal Emission and Reflection Radiometer (ASTER) instrument captured an image of over 70 ships waiting to dock and unload at the ports of Los Angeles and Long Beach, due to a supply-chain crunch. The image covers an area of 14 by 16 miles (23 by 25 kilometers). Credit: NASA/JPL-Caltech
4. Clogged ports
All these problems are contributing to another challenge: U.S. ports have become extremely backed up with ships waiting to unload their cargo.
A large ship can hold 14,000 to 24,000 containers. That means one ship waiting to make port could hold as much as 5.5 million televisions or 33.6 million sneakers.
Normally, there is no wait for these ships to dock and unload their cargo. But the record demand for imports and shortages of truckers, containers and other equipment has caused substantial delays.
No end in sight
Before COVID-19, global supply chains worked pretty efficiently to move products all around the world. Companies utilized a just-in-time philosophy that minimized waste, inventories, and expenses.
The cost of that, of course, is that even small problems like a hurricane or a factory fire can cause disruptions. And the pandemic has caused a meltdown.
While I don’t expect a resolution to most of these problems until the pandemic ends, a few things could relieve some of the pressure, such as a shift away from consumer spending on goods to services and increased global vaccination rates.
But the difficult reality is American consumers should expect bare shelves, delays, and other problems well into 2022.
Written by Kevin Ketels, Lecturer, Global Supply Chain Management, Wayne State University.