Why supply chains are getting disrupted as we recover from Covid -19?
Logistics firms complain of delays in shipment, which is costly to their firms. Their customers are unhappy too. It is worse when the delay is in materials that are input into manufacturing or even repairs. Think of areas like pharmaceuticals or other expensive and sensitive machinery and how they are affected by such disruptions.
Even customers for luxury items are unhappy. The owners of logistics companies are blamed, yet they do not control the supply chains from shipping to scheduling.
You may have noted the rising cost of shipping too. So what’s going on? Why the disruptions?
The delay is not just in the supply chains that are being interrupted but also in the economy with rising inflation as demand increases with prospects of returning to normalcy. Vaccines had unintended consequences.
Let’s go back a bit. When Covid-19 came, countries locked themselves while factories closed or scaled-down because of reduced demand. Jobs were lost, and machines were rested. Expansion plans were halted.
Then came vaccines and the prospects of returning to normalcy. That is where the problem lies. It takes time to restart factories, rehire workers, repair machines, schedule ships or put them back to service. Add incorporation of other players in the supply chain and their unique problems. Would have incurred a cost repairing a vessel during a Covid-19 lockdown?
As the economies recover from Covid-19 induced economic contraction, the pent-up demand leads to shortages and disruptions. So what do you do with a sudden surge in demand for shipping? The easiest solution is to raise the price of shipping. That means many shippers and customers will delay their shipping, hoping that the cost will soon decrease. No wonder logistics firms are complaining of delays. Remember, “About 80% of the goods we consume are carried by ships,” says UNCTAD.
Don’t forget that with Covid-19, governments gave stimulus packages that steadied the demand for goods and services. Others stockpiled while e-commerce created more need for shipping. The shipping demand did not go down as anticipated. With recovery came the interconnected supply chains, ports, rails, and roads that were not ready for the sudden demand. Few thought we would get a vaccine in a year.
Bring in Omicron Covid -19 variant, and lots of workers are getting sick, delaying loading or unloading ships and other services and therefore upsetting schedules. Remember, ports are interconnected, and a delay in one leads to the other. Worse, Covid -19 came when globalization and outsourcing were at their peak. That exacerbated the disruptions.
Any solution? There are indications that the weakness of the Omicron variant means the pandemic could be nearing its end or becoming endemic, says Dr. Antony Fauci, director of the USA National Institute of Allergy and Infectious Diseases and the Chief Medical Advisor to the President
We should see the current disruptions as a necessary evil as we return to normalcy. Remember how we struggle to get back to rhythm after a holiday or even after school holidays or sick leave?
Logistics firm owners should explain to the customers the short- and long-term effects of Covid -19 on supply chains. Luckily we have lessons for the next pandemic or similar disaster, and we shall be more prepared.
But, for now, let’s be patient. We are all in it.