Global Supply Chains Struggle with Surging Demand

Container ships anchored off the coasts of the United States have been told they could face a four-week delay before being allowed to dock and unload goods consumers are eagerly awaiting and the parts needed by American manufacturers.

Across the Atlantic in Britain, too, empty supermarket shelves, and frustrated drivers forming long lines at gas stations to fill up, tell a similar story of an unprecedented strain on cross-border global supply chains. 

The pandemic has wreaked havoc on the world’s traditional supply chains. Congestion at ports, factory closures, soaring freight charges and an acute shortage of transport workers is likely to get worse, the International Chamber of Shipping and allied transport groups have warned.

In a letter to the United Nations General Assembly last week, they warned of a “crumbling” global supply chain.

Before the pandemic, synchronized cross-border supply chains could be relied on to move goods, raw materials, and parts just before they were needed by stores and factories.

But the chains are snapping.

The continent of Europe is also facing disrupted supply chains, although not as critical at this stage as Britain, where post-pandemic delivery challenges have been intensified by trade disruption consequences of Brexit.

Labor shortage 

“The logistics sector lacks qualified personnel such as lorry drivers but also trained locomotive drivers, inland navigation workers, terminal workers, as well as management people,” Frank Huster, director of Germany’s main haulage association, told European broadcasters.

 

The EU transport industry reckons it has a shortfall of more than 300,000 qualified truck drivers.

From Los Angeles to London, Beijing to Berlin, countries are seeing a supply crunch rarely experienced outside wartime. According to the American freight industry the average time it takes now for a package to be sent from Asia to the U.S. has increased by 43% since last year.

The supply crunch is a consequence of a sudden surge in demand for goods, labor and energy as national economies emerge from the slowdown of the pandemic, say economists. That surge has strained the supply chains from assembly to delivery.

Factories in China and other Asian industrial hubs that have been trying to gear up rapidly amid soaring prices for energy, struggling with blackouts as they do so. Stores and supermarkets in Western countries are struggling to find sufficient shop staff. Transport companies are scrambling to find delivery drivers.

Now retailers in America and Europe are warning of increasing shortages as the logjams of container ships are prolonged and amid a labor shortage in the retail, leisure and entertainment sectors.

And the problem is likely to get worse before it gets better, say economists and business owners.

The U.S. and Europe are heading into the high consumer spending months of Thanksgiving and Christmas and retailers are already warning of insufficient supplies of electronic and sporting goods and even of Turkeys and Christmas trees.

Local factors have worsened the crunch in some cases. In America, Republican lawmakers say pandemic-related increases in unemployment benefits have contributed to the lack of workers. Others say low wages have prompted people to rethink their careers and for some approaching retirement age to drop out of the workforce.

Brexit fallout 

In Britain, the impact of Brexit — which has complicated the movement of goods and food between the U.K. and the 27 member states of the European Union — has become a source of contention between government ministers and business leaders.

The latter blame the government for having ill-planned Britain’s departure from the EU. Conservative cabinet ministers blame industry for empty shelves and gas shortages saying businesses should have prepared for a post-Brexit economy. They contend that the country’s supply crunch is a failure of the free market, and not the state. 

 

“When you talk about some of the supply chain issues, that’s really a function of the world economy, particularly the UK economy, coming back to life after COVID,” said British Prime Minister Boris Johnson Monday. “There is a shortage of lorry drivers actually around the world, from Poland to the United States, and even in China they are short of lorry drivers,” he added.

Local factors aside, though, some logistics experts say a global supply crunch has long been in the offing. They say supply chains, as they have developed, have lacked resilience and were overly vulnerable to economic shocks.

John Manners-Bell, chief executive of Transport Intelligence, a market research company that advises the World Bank and the United Nations on global logistics, says businesses and governments have neglected supply chains and failed to invest enough in them or update them. Transport and freight workers have for too long been poorly paid, he says.

“Whilst all attention is naturally focused on present supply chain disruption, there will be positives to come out of the chaos [hopefully],” he tweeted this week. Among them: “Governments will invest more in transport infrastructure and overhaul outdated working practices [especially in ports and shipping]” and “Companies will invest more in technologies that improve the current [poor] efficiency of transport assets especially trucking.”

He also hopes manufacturers will “recognize that single sourcing from China is not a good idea.” 

October 5th, 2021 by
your ad here