You may have noticed your online orders are taking a little bit longer to arrive than they used to. It’s not just ASOS packages that are piling up.
Pretty much everyone you speak to will have a story about something they’re waiting on.
A friend’s book club has changed their monthly pick because all the local bookshops have run out of copies.
A colleague trying to hook up NBN at their place is on the waiting list for a HFC connection because their provider can’t get the hardware.
A neighbour’s house is half-renovated because the price of timber and steel have gone through the roof.
The same thing is happening in Europe, the UK and the US. It feels like the world is running out of, well, everything.
It’s all thanks to a few very unfortunately timed kinks in global supply chains.
What is the global supply chain?
Supply chains are essentially a massive web of components that work together to manufacture and deliver most of the world’s goods and services to consumers.
Let’s say you’ve ordered a pair of runners online. This supply chain includes everything from:
- sourcing the raw materials (that could include rubber, cotton, foam, nylon or any number of other synthetics)
- transporting those materials to the factory where the product will be manufactured
- processing materials to turn them into the parts of your shoe (the sole, the upper, the outer sole, the footbed, the laces) and fixing them all together
- packaging into the final product
- transporting finished products overseas to distributors, retail stores or warehouses and in many cases, delivering them right to your door.
You’ve probably ordered from a big-name brand that operates on an international scale and has expanded their supply chains worldwide to develop their goods and services more affordably and efficiently.
They typically seek out the most convenient places to source their raw materials and components, the most affordable labour, the fastest freight routes, all to maximise profit and minimise lead times.
This has made supply chains become increasingly complex, according to Monash University’s Amrik Sohal, director of the Australian Supply Chain Management Research Unit. And the pandemic hasn’t helped.
“COVID-19 has introduced added complexities and uncertainties into the supply chains. So, predicting what customers want and what is available has become extremely difficult,” Professor Sohal says.
Basically, if one link in the supply chain is broken, it slows down everything else. And, right now, we have a lot of broken links.
The pandemic kicked off the perfect storm
Logistics experts say this crisis has been brewing for a while, but COVID-19 kicked things into gear.
“It really accelerated a lot of what was building up and, all of a sudden, everything has hit and supply chains have not been able to recover,” says Cathy Morrow Roberson, who owns US market research company Logistics Trends and Insights.
First, the pandemic prompted an unexpected shift in demand. When COVID-19 first emerged in China, it shut down the manufacturing powerhouse while the rest of the world carried on, throwing off the balance and creating a backlog.
Then, as COVID-19 spread around the world, there was a halt in demand for some products, and a spike in others.
People who found themselves working from home were also spending big on office equipment.
As many wealthy, vaccinated nations have begun to open up again in 2021, economies are picking up and more people are spending. And, crucially, much of those purchases are being made online.
This shift in demand has collided with a shortage of labour across almost every link in the supply chain.
Staff get sick, or need time off to get tested, isolate or go into quarantine, or local restrictions mean they can no longer travel into work. It means many factories are no longer running at full capacity.
In some cases, that means it takes longer to make your pair of runners, but in others, staffing levels have been so low that factories had to halt production entirely.
It could be that the shoe manufacturer is operating fine, but they’re waiting on a delivery of laces from another manufacturer to finish the product. Orders start to back up.
“There is a huge backlog in factories and in raw material reproduction, and there is a huge backlog in shipping the products … from the Far East to Europe or to the States,” explains Anglia Ruskin University’s Ying Xie, director of the Centre for Intelligent Supply Chain.
Cargo ships line up at ports while some containers sit empty
Assuming your pair of shoes does get made, it needs to travel from the factory to a nearby port, and then (usually) over the sea to a port near you. But there’s also a shortage of empty containers and ships to carry those containers across the ocean.
So where are all the containers? Many of them are filled to the brim with finished products waiting to get to customers, or the intermediary products (let’s say, your laces) that manufacturers are waiting on to finish making their items.
But they’re stacked in piles at shipyards around the world, or sitting on ships that are lined up in droves waiting to get into congested ports.
“They need to be transported to the destinations, but, most of the time, these containers need to be transported by [trucks]. And we don’t have enough drivers to transport them to destinations,” Dr Xie says.
Given the fluctuations in demand, and ships waiting days to unload — not to mention one of them getting itself stuck in the Suez Canal — many companies have reduced their number of vessels on the water.
The congestion is so bad, many ports have now stopped accepting empty containers because they have nowhere to put them.
With no empty containers being shipped back to the major exporters, they can’t ship you your goods.
All of those factors drive up the price of shipping, too. Xeneta, a company that tracks shipping rates, estimates long-term ocean freight is 90 per cent more expensive than it was this time last year.
Truck drivers are in hot demand, but we don’t have enough
All over the world, there’s a massive shortage in the human being who gets your package from A to B, particularly truck drivers.
In the UK, the squeeze has seen supermarket shelves emptying, while McDonalds ran out of milkshakes and Nandos and KFC can’t get chicken. Last month’s petrol shortage had less to do with a lack of fuel than a dearth of drivers to deliver it to the pump.
The problem there has been exacerbated by Brexit, with many drivers returning to Europe for work now that immigration rules have changed.
The US is also running low on truck drivers, as are several countries across Asia and Europe.
Here in Australia, the shortage of drivers is compounded by ongoing negotiations about pay and conditions.
Dr Xie says there’s also been a workplace shift during the pandemic, with drivers moving from long-distance jobs to “last mile” delivery.
And lockdowns have made it virtually impossible to train new staff to replace those long-distance drivers.
It’s not just the drivers. Professor Sohal notes, in some cases, trucks that were transporting consumer goods like your shoes, for example, are now being used to ferry COVID-19 vaccines, medications and PPE around.
As Ms Morrow Roberson puts it: “Any shutdown or delay upstream in the supply chain is going to have that trickle-down effect across the entire supply chain.”
What’s being done to deal with the crisis?
Some big US retailers are finding creative ways to get around the backlog, including buying their own containers and chartering ships to get their goods to customers on time.
But there’s only so much they can do.
“The big pain point right now is from the port to the final mile. Whether it’s to manufacturers, retailers or the front door of our homes,” Ms Morrow Roberson says.
Carriers such as UPS and FedEx in the US are already struggling with the surge in demand, and Australia Post is grappling with COVID-driven delays.
Some companies are resorting to air freight, or diversifying the sea ports they’re using.
Retailers in the US are now sourcing goods from Mexico instead of Asia, while European companies look to Turkey and North Africa. But all these things cost money.
Despite the dramas, Professor Sohal says companies are embracing new technologies to make logistics, warehousing and supply chain management more efficient.
“We’ve become very effective in terms of tracking and tracing products moving along supply chains. We’re using artificial intelligence and carrying out various levels of data analytics. So, decision making is much more improved than a decade ago,” he says.
Dr Xie agrees AI and adaptive technologies could help to speed things up, as well as bolstering the workforce and adapting domestic freight away from roads towards rail.
But major changes to infrastructure can take a long time, decades even, so there’s still a long road out of this mess.
When will things to go back to ‘normal’ and what should shoppers do until then?
Experts say it could take years for global supply chains to recover.
“We might go back to a new normal, with reduced capacity … [but] I don’t think the congestion or disruption to supply chains will be erased soon. It will take a couple years.”
US consumers are being urged to do their Christmas shopping early. In Australia, one retail analyst has warned “if the products are not on the water, it’s not going to be here for Christmas”.
Professor Sohal is more hopeful that things will ease up towards the end of this year, but also warns consumers might need to adjust their expectations.
“And if you really want to have something, you know, a particular brand, a particular colour, shape and size, then we’ve got to be prepared to wait.”
Professor Sohal says it’s a great opportunity for Australians to support local businesses developing their supply chains closer to home. It may come with a higher cost, but “it’s give and take”.
Regardless of whether we shop here or overseas, there may be some products we’re waiting on for a while.
And a natural rubber shortage on the horizon could affect everything from car tyres and engines to refrigerator seals, condoms and sporting equipment. Maybe even your next pair of runners.
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