The Supply Chain Crisis of 2021 in the US

Topic: Economics
Words: 1416 Pages: 5

Introduction

The supply chain crisis of 2021 in the US left many stores with empty shelves and many customers – without the required goods and caused a gradual increase in the costs of day-to-day living. COVID-19 is cited to be the main reason for the struggle, but blaming the disease alone would simplify the complex and long-term issues that persisted in the US way before the crisis (Cossgrove 2021). Some of these include overconsumption, inefficiencies of the logistics system, inadequate infrastructure, and overreliance on foreign imports, to name a few (Cossgrove 2021). The crisis had only revealed and exacerbated these problems, causing a near-collapse of the supply chain across the country. The purpose of this paper is to describe the problem, identify root causes, and predict what can be done to improve the situation in the long term.

Problems with the Supply Chain

The problems across the supply chain in the US are manyfold and affect it throughout its entire length, from the acquisition of the necessary materials to delivering the end products to customers. Some of the main issues are as follows (Cossgrove 2021):

  • Raw material shortages. Not enough raw materials are being produced to cover the needs of the US economy and those of countries that are its direct suppliers. As a result, production is affected (Hartmans 2021);
  • Delivery time increases. Getting the products from point A to point B has become increasingly difficult. Customers, both private and corporate, have to wait for prolonged periods of time for goods to appear on the shelves or at their doorstep;
  • Consumer panic. Because of the shortages of goods, commotion is increased among the general populace, who seek to purchase as much as they can. This creates a social struggle, which inflates the crisis further;
  • Businesses struggle. Many companies have already taken a significant hit during the COVID-19 endemic, with many having been forced to downsize or close. The inability to retrieve and provide goods on time may force some to default on their obligations (Khan and Yu 2019);
  • Social vulnerability. As with all crises, empty shelves and supply shortages affect the poor more than the rich. While the latter can afford to pay more to avoid shortages for themselves, the poor are caught in a vicious cycle of the price increase and general unavailability of goods (Khan and Yu, 2019).

All of these problems are but a facet of how deep and systemic the crisis is. At the same time, they are some of the most visible issues that currently affect the US economy, the supply system, and the end customers. Understanding the causes of these problems would lend greater insights into how such a crisis came to be.

Root Causes

Each problem listed above has a series of underlying causes behind it. Raw material shortages are associated with a myriad of smaller problems that, in turn, compile into one big one. The US is a major importer of raw materials from other countries, where they can be obtained for cheaper. These suppliers are often found in 3rd-world countries, which are notorious for low vaccination rates (Cossgrove 2021). The authorities of these countries have tried to protect their populations by initiating lockdowns and barring staff from working in the facilities, resulting in a reduction in output. The same situation can be seen with items produced in these countries. The US market relies heavily on cheap goods produced in China, Vietnam, India, and other countries (Cossgrove 2021). They are affected by the supply chain problems, having trouble getting the materials needed to maintain production, coupled with lockdowns barring workers from getting to the workplace. In combination, these issues make the crisis exponentially worse.

The other large cause of the supply chain crisis is associated with transportation. The demand for ocean and air shipping is at an all-time high because people are trying to buy items in bulk or order them from the safety of their homes (Cossgrove 2021). At the same time, the ports are affected by anti-COVID regulations as much as factories and other similar facilities. Port congestion causes many goods that have already been shipped to stay in port for prolonged periods of time, increasing the pressure on the facilities and forcing other ships to stay docked and wait to be unloaded (Khan and Yu 2019). This problem increases waiting times across the entire chain. Not all goods can afford to be stored in the port for too long. Perishables, for example, are more likely to be lost if they are queued for delivery for too long. To avoid that situation, retailers are often forced to utilize more expensive but faster supply routes, and those prices are placed, in the end, on the customers.

Transportation within the country is complicated as well, which does not make the crisis better. It is generated by several overlapping factors. First is the increased demand for trucking services, with some reports estimating it to be higher by 30%-40% compared to 2018, which was a COVID-free year (Rahamanickam 2021). Thus, even if the situation was normal, there would have seen been a requirement to get more trucks out on the road. The fleet of drivers, on the other hand, was shrunk, as individuals are required to be vaccinated in order to be allowed to the workplace. The available trucks and drivers are often misplaced, and forced to sit idle because of the inefficiencies of the supply chain. Before the crisis, they were used to haul industrial goods. With the demand for those dropping due to the various supply chain issues, these trucks and drivers can be sent to address the demand in other areas, which is not being done. As a result, even the goods that are available are getting to customers at a slower pace, deepening the crisis.

Finally, there’s the issue of customers making panic purchases, which drastically inflated the demand. The situation is similar to the crisis at the start of the COVID-19 pandemic when stores did not have enough toilet paper on the shelves. Everything is being bought in bulk, forcing the supply chain to endure shipments at a rate it cannot maintain (Cossgrove 2021). An increase in demand also increases prices, which affect the poorest the most. They are often unable to purchase in larger quantities, lacking the means of transportation to and from large stores, coupled with their lower purchasing power. As a result, the social aspect of the crisis worsens, with the economy failing those placed on its fringes.

What Can be Done?

The crisis currently experienced by the US economy is systemic and has everything to do with globalization. The long-term solution for the supply chain crisis is to be less dependent on foreign imports and be able to sustain basic functionality in the event of a partial isolation or logistics collapse (Khan and Yu, 2019). While domestic production has been significantly affected by the crisis, the number of supply chain links between local and foreign imports is significantly smaller. The optimization of the trucking industry to address the existing needs would help improve the situation with delivering goods that are already in port. Finally, the eventual decline of the purchasing fever among the customers would help reduce the pressure on the entirety of the supply chain. Nevertheless, it is expected to return whenever there is a crisis, so the logistics would have to be prepared for the next time it happens (Khan and Yu 2019). Once reliable treatments for COVID-19 are found and the danger of the disease is reduced, the economy will be able to return to its pre-COVID levels of efficiency.

Conclusions

The US supply chain crisis of 2021 revealed the weaknesses of an economy filled with inefficiencies and too reliant on global imports in order to keep its population’s needs sustained. Empty shelves increased prices for goods, and longer waiting times are hitting the retailers and the customers very hard. The crisis affected the entirety of the supply chain, ranging from the provision of raw materials to truck-hauling. Some of the aspects of the crisis can be mitigated with better planning and a more mindful reaction from society. The crisis will also become less influenced by COVID-19 as more individuals get vaccinated or acquire immunity otherwise. Mass immunization, however, will not provide a solution for all of the highlighted problems, as the crisis is bound to be repeated by the next global event that would affect the supply chain in a similar manner.

Reference List

Cossgrove, Emma. 2021. “Where the supply-chain crisis came from, where it’s going, and when it will be over.” Insider, Web.

Hartmans, Avery. 2021. “Furniture shipments are still delayed due to a foam shortage that’s slowly improving – as long as car production doesn’t ramp back up.” Insider, Web.

Khan, Syed Abdul Rehman, and Zhang Yu. 2019. Strategic supply chain management. New York: Springer International Publishing.

Rajamanickam, Vishnu. 2021. “The US has plenty of trucks to ease supply-chain chaos – but they’re in all the wrong places.” Insider, Web.

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