Supply Chain Shortages: Your Questions Answered

The sharp increase in demand blocked the system for transporting goods to the factories that needed them. At the same time, finished products – many of which are made in China – were piling up in warehouses and ports across Asia due to a severe shortage of sea containers, those standard-size steel crates that carry goods on huge ships.

Simply put, they got stuck in the wrong places. In the first phase of the pandemic, as China shipped huge volumes of protective gear like masks and hospital gowns all over the world, containers were unloaded in places that usually don’t return much. of products in China – regions like West Africa and South Asia. In these places, empty containers piled up just as Chinese factories were producing a huge wave of other goods destined for wealthy markets in North America and Europe.

Because containers were scarce and the demand for shipping intense, the cost of transporting goods skyrocketed. Before the pandemic, shipping a container from Shanghai to Los Angeles cost maybe $ 2,000. At the start of 2021, the same trip was grossing up to $ 25,000. And many containers were overturned from ships and forced to wait, adding to delays throughout the supply chain. Even big companies like Target and Home Depot have had to wait weeks, if not months, to get their factory finished products onto ships.

Meanwhile, in the ports of North America and Europe, where the containers were arriving, the massive influx of ships exceeded the availability of docks. At ports like Los Angeles and Oakland, Calif., Dozens of ships were forced to anchor in the ocean for days before they could load and unload. At the same time, truck drivers and dockworkers were stranded in quarantine, reducing the availability of people to unload the goods and further slowing the process. This situation was made worse by the closure of the Suez Canal after a giant container ship got stuck there, and then by the closures of major ports in China in response to new cases of Covid-19.

Many companies responded to the initial shortages by ordering additional items, which increased tensions on ports and filled warehouses. With the warehouses full, the containers – suddenly serving as storage areas – piled up in the ports. The result was the mother of all traffic jams.

Just about anything that is produced or manufactured, from chemicals to electronics to running shoes. Shortages create more shortages. A paint maker who needs 27 chemicals to make their products may be able to buy all but one, but this one – perhaps stuck on a container ship off the coast of Southern California – may be enough to stop production.

Cars use computer chips – a lot of them – and chip shortages have made it more difficult to produce vehicles. In turn, this has made buying cars more difficult and more expensive.

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About Bob C. Zoller

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