Supply chain disruption could create rocky holiday shopping season
October 29, 2021
October 29, 2021
The delta variant of COVID-19, a shortage of workers and truck drivers, bottlenecks at vital shipping ports and economic inflation are compounding in disruption at all points of the supply chain. As a result, both supply and demand functions are suffering, said associate professor of management Iddrisu Awudu.
“The supply side is inadequate in terms of raw material. Packaging costs are up due to inflation, and manufacturers need more employees,” said Awudu. “On the demand side, manufacturers continue to predict false quantities, resulting in too much or too little inventory. Customers aren’t able to find what they want on the shelves.”
This past summer saw the closure of factories in Indonesia, Vietnam and other Asian countries that U.S. retailers relied on for production. For those factories still open, shipping times increased along with overseas demand as available laborers became scarce, said associate professor of management Dr. Yan Jin.
“It’s almost impossible to identify something in the industry or our personal lives that isn't affected by this disruption,” said Jin.
She cites how even school meals are suffering, as districts can’t offer the typical breadth of dining options for students.
Attracting and redistributing laborers is imperative for the supply chain to normalize, but this isn’t an easily solved dilemma. Many people who lost their jobs due to COVID-19 aren’t interested in returning to the traditional workforce and continue to seek remote opportunities.
Major retailers like Walmart and Amazon are wooing possible employees with sign-on bonuses and higher than usual wages. Though likely helpful to get the companies through the holiday rush, these types of incentives likely aren’t enough to guarantee long-term employment, said Jin.
“Companies need to think out of the box to find creative ways to find and retain workers. In most cases, you can’t increase salary all that much. A small bump isn’t that attractive, as there is just so much competition in the market,” said Jin.
States are looking to stabilize their economies by courting newly mobile remote workers. Places such as Tennessee and Missouri recently created initiatives for newcomers. This includes free daycare and a monetary bonus for buying a home, explained Jin.
There are state-level initiatives to help suppliers as well. For example, Connecticut Governor Ned Lamont recently awarded funds to small manufacturing companies within the state, said Awudu.
The federal government continues to try to expedite the supply chain’s recovery. Under an order from President Joe Biden, the twin ports of Los Angeles and Long Beach are now operating 24 hours a day to address a massive backlog of containers.
There is approximately $24 billion worth of ship-ready goods currently floating outside these ports, per Goldman Sachs.
The Federal Reserve committed to scaling back government asset purchases, which will ease inflation.
Ultimately, the global supply chain will recover from the holistic effort of its components.
“The global supply chain is cyclical. It is an adaptive cycle, and by each part improving its process, the cycle will eventually improve,” said Awudu.
Consumers can help in restoring balance to the global supply chain by avoiding panic buying and only purchasing what is truly necessary, said Awudu. He also suggests shopping earlier than usual to allow a larger window for packages to arrive and to give consumers time to find the perfect gift.
Though virtual shopping may be habitual due to COVID-19, Jin suggests shopping locally to support your community and find unique gift ideas.
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