What’s behind the global supply-chain problems?
Lockdowns at key manufacturing hubs like Shanghai; hundreds of ships waiting at congested container ports; manpower shortages in land-based logistics chains; vital components and chips unavailable; consumers waiting endlessly for orders to arrive: multiple factors are acting like a spanner in the works of a global supply-chain system that had run like clockwork for decades.
The division of labour this globalised procurement system had made possible from the 1980s brought significant economic benefits along the supply chain. It raised living standards in manufacturing hubs like China and Vietnam, enabled ultra-efficient just-in-time manufacturing processes, and made both industrial components and consumer products a lot cheaper. But ever since the Covid-19 pandemic spread in early 2020, global supply chains have been under increasing pressure. For what reasons?
Watching all the containerships at anchor off the shores of Southern California or Shanghai may be great fun for ship-spotters, but shippers, carriers, logistics managers and importers aren’t so amused. The hundreds of containerships waiting off key ports like Los Angeles, Long Beach or China’s mega-terminals are symptomatic of massively disrupted global supply chains. There are multiple reasons for the delays these containerships are facing: pandemic-induced imbalances in Asia trades, China’s zero-covid policy accompanied by strict lockdowns, striking dockworkers, too few truckers on both sides of the Atlantic, and a shortage of rail chassis in the USA. The outcome? Massively malfunctioning globalised supply chains. After all, 90% of the world’s trade is carried by ship.
This year, the situation has actually got worse. China’s ultra-strict zero-Covid policy has markedly reduced the country’s manufacturing output – with knock-on effects throughout the world – and the Russian invasion of Ukraine has contributed to soaring energy and commodity prices. Now, economic experts are even predicting a recession in the Western world.
The outlook may not look too good, but we aren’t helplessly caught in a downward spiral of economic doom and gloom. In North America and Europe many major companies are taking a critical look at their supply chains and investigating the possibilities of reshoring (i.e. returning components’ production to their own shores), relocating factories in more “politically safe” countries (e.g. moving from China to Vietnam) or finding new sources of raw materials. Nobody can prophesy what the future holds but one thing is certain: supply chains in years to come will look quite different from pre-pandemic times.