Supply chain delays: Here for good or just a phase?

What are supply chain delays? 

The supply chain consists of a series of processes that facilitate the production and distribution of goods. Any delay creates a domino effect of disruptions to the normal flow of the global ecommerce ecosystem.

The massive influx of online and cross-border shopping over the past couple of years has left companies and individuals—including manufacturers, retailers, shippers, and exporters—desperate to catch up.

Consider this pre-pandemic scenario: you, a consumer, order some clothes from a foreign online retailer. The retailer packages and ships your order. Unless an express shipping method was chosen, it will most likely be placed in a shipping container to be loaded onto a cargo ship. The ship arrives at its destination port, the shipping container is unloaded onto a truck, and then the load is driven to the nearest post office to be directed to the correct recipient. Finally, your package is successfully delivered to your doorstep—all within one to two weeks!

Now, let’s look at the same scenario with the added supply chain delays. If you want to order some clothes from a foreign online retailer, you may not be able to. Due to delays and shortages, certain parts and materials for production are unavailable, meaning many things are out of stock. When the goods are in stock, the retailer is probably overwhelmed by the increase in online shopping and labor shortages brought on by Covid-19. The massive influx of shipments led to fewer ocean-container availability. Space on available containers is limited, delaying shipments for weeks before they are even loaded.

There are more online cross-border orders than the containers can currently handle. Even in transport, boats can be delayed by blank sailing, which is when an ocean vessel does not stop at one or more scheduled ports of call. Once the package makes its way to the destination port, it likely will remain docked for a few weeks because a shortage of dockworkers has significantly slowed the process of loading and unloading containers. Once it is unloaded, the shipment must wait for a truck (there is a shortage of transportation trucks as well) to be driven to the nearest domestic distributor or local delivery service. It’s possible that your package won’t arrive until weeks or even months after the order was placed.

What has caused supply chain delays? 

While Covid-19 was what started supply chain delays, the resulting problems will outlast the virus. Shortages, demand, and lifestyle have contributed to the ongoing delays.

Covid-19 catastrophe

The Covid-virus was first detected in Wuhan, China. China is a huge hub for factories and manufacturing warehouses where a lot of companies outsource their manufacturing. Safety measures had to be taken, so factories closed, workers quarantined, and production ceased. This alone caused a huge disruption in the supply chain; factories and manufacturers have been playing catch-up ever since.

The pandemic did not eliminate spending so much as shift it around. Ecommerce purchases focused on accommodating home offices, home gyms, gaming setups, and other items that would provide entertainment during quarantines and lockdowns. However, before the pandemic, online sales made up less than 15% of retail sales; now, about 20% of retail sales are made online.

Shortages

Generational deficiency

The pandemic had indirect effects on the supply chain as well. Governments in various parts of the world gave out stimulus checks and raised compensation for unemployment. This provided a safety net for those that needed it, and for others, it made it possible to be more selective about their next employment opportunity. This has resulted in a shortage of employees in nearly every industry, but other factors also contribute to the shortage of employees.

The baby boom took place from 1946 to 1964; those babies are now between the age of 58 and 76. There is a decline taking place in the workforce because a sizable portion is retiring or preparing to. On the other end of the spectrum, Generation Z (Gen Z) is just entering the workforce, which should balance things out, right? Nope. Many of the jobs that babyboomers left behind are jobs that Gen Z views as undesirable, so those jobs are remaining unfilled. The companies that do acquire Gen Z within their workforce are also at risk. Research from Microsoft showed that 54% of Gen Z are thinking about quitting their jobs and Bankrate reported that 77% are thinking about quitting. Gen Z expects the workforce to value the same things that they do, and if their current job or company doesn’t align with their values, then they won’t hesitate to quit and attempt to find a job more suited to their lifestyle. Furthermore, when Gen Z babies were born, their umbilical cords were practically immediately replaced with smartphones.

Smartphones and social media have transformed face-to-face interactions into rare occasions, which has caused an alarming increase in anxiety and depression, hindering their ability to work. The combination of over-compensating and extended unemployment benefits, baby boomers retiring, and Gen Z’s low work tolerance has left a lot of “hiring” signs unturned for years now.

The labor force is the most essential element in maintaining the flow of the supply chain. Without workers, the supply chain disruptions multiply exponentially.

No trucks? Shucks!

Shipping docks are experiencing a perfect storm of gridlock between the enormous influx of ecommerce import ships and an extreme shortage of dockworkers. The effects of shortages and demand have left the largest port in the US with 30% more shipments and 28% fewer workers compared to pre-Covid-19. Once the few dock-workers that are left have unloaded all of the cross-border shipments, there aren’t enough shipping containers, semis, or drivers to move the shipments out of the port and toward their final destination. We know why there’s a shortage of drivers, but what about the shortages of shipping containers and semis.

As we are currently sliding into a recession faster than teenagers sliding into Harry Styles’ DMs, we’re not past the last one as the 2008 recession is still haunting us. Transportation companies were forced to cut back on new capital expenditures, including purchasing trucks. When the 2008 recession caused everyone to cut back on spending, demand was so low that companies couldn’t afford to have extra semi-trucks; a deficit the industry hasn’t been made up in the years since. Alix Miller, president, and CEO of the Florida Trucking Association says that the US is short 100,000 trucks. Furthermore, companies that have ordered trucks will be waiting for a while. Hundreds of thousands of trucks ordered by companies are back-ordered, waiting for computer chips and parts made overseas.

Chips don’t just belong on grocery lists

Another indirect effect that Covid-19 had is that a huge percentage of the world’s population had to work from home, which meant equipping employees with in-home tech in addition to what was already in the office. Demand for devices like laptops, among other electronics, increased substantially. While people were scrambling to get Macs or Chromebooks, hardly anyone was looking to buy a Subaru or Honda. As the demand went up for electronics in 2020, car sales dwindled. However, if you’re in the market for purchasing a car right now, then you’ve probably noticed that prices seem to be a bit steeper and the inventory lacking.

So what do home offices, cars, and grocery lists have in common? They all need chips. Cars today require hundreds or thousands of semiconductor chips, but since cars weren’t in high demand for a few years, the chips were directed toward the production of smaller electronics. Most car manufacturers are now unable to get their hands on enough semiconductor chips, so carmakers have been forced to cut production. Sales for game consoles, laptops, smartphones, etc. are more of a pressing matter for many consumers, so the chips that are being manufactured are going to those businesses, not automobiles. Some companies began to hoard chips, which just makes the supply chain shortages worse.

Demand slammed

Each section above has touched on demand, but the amount of demand is unfathomable … and obviously unmanageable. Online sales made up about $3.35 trillion USD in 2019, but it’s predicted that that number will rise to $5.5 trillion USD by the end of 2022. Surveys have shown that 75% of people shop online at least once a month. With the wider accessibility to the internet and growth in smartphone purchases, the number of online shoppers grows daily. The accessibility, efficiency, convenience, price comparability, and variety that online shopping offers are more than enough reasons to explain the seemingly never-ending spike in demand.

Accustomed customers

Shopping online has become a way of life—a new normal. Although manufacturers and shipping companies assumed that demand would drop post-pandemic, it hasn’t. Older shoppers that weren’t accustomed to online shopping pre-pandemic had to learn how and favored the convenience. Convenience is a key component for many shoppers; if they can find products faster and cheaper from the comfort of their own home, why would they pass that up? Gen Z is already more accustomed to doing everything online, so they’re naturals when it comes to ecommerce. The growth in demand continues because more people have realized the ease of shopping online. The growing demand and shrinking resources consequently caused supply chain delays.

What’s the fate of the supply chain wait? 

While growth is beneficial for some retailers, many businesses can’t keep up with the demand. The missing links in the supply chain have to be repaired or replaced before we can expect to see delivery times, prices, and organization level out.

A lot of factories, manufacturers, retailers, and businesses are up to their ears playing catch-up due to the combination of the pandemic; shortages of workers, trucks, and computer chips; skyrocketing demand; and the world’s quick adoption of online shopping.

So, will the waiting and catch-up game last forever? The good news is that there are already practices being put in place that are going to lessen and hopefully end the supply chain delays. These practices include diversification, prioritization, knowing your customers, utilizing more advanced technology, and more.

Tips on dealing with supply chain delays 

As long as you’re waiting for your packages to arrive, you might as well keep an eye out for our upcoming blog on best practices and tips to handle the supply chain.