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March 18, 2022

Amid COVID-19 chaos, global supply chain seeking stability

By Tonya McMurray

As the pandemic enters its third year, the global supply chain is increasingly strained and unreliable, causing empty store shelves and delivery delays.

“The complex system that moves our raw materials to finished products around the globe requires predictability and precision, and those have been lost,” said Garry Castro, CEO of Logisticorp LLC. “The supply chain is challenged, and its vulnerabilities are being exposed. There are many contributing factors, but ultimately it was the pandemic that triggered a series of events that created a domino effect.”

The current supply-chain disruptions can be traced to lockdowns in the early days of the pandemic which created backlogs in both the United States and around the world.

“In the early stages of COVID-19, if you were not identified as an essential business, it was difficult to gain traction after the lockdown,” Castro said. “And then you had people who tested sick or were exposed and weren’t allowed to return to work. Now, all of a sudden, you have labor shortages.”

Those impacts were felt across the globe, including in China where more than 12,000 production facilities were shut down. Because China is essential in the production of many goods and services, the impact of lockdowns and quarantines in that country quickly spread globally.

“We depend on China for so many of our goods and services,” said Mitch Ward, CEO of MW Logistics LLC. “Basically, all of our raw materials come out of that country, so when COVID happened and you shut down factories in China, everyone felt it.”

The pandemic also resulted in many ports shutting down, which creates significant backlogs. Supply ships can’t get to ports to unload, and when they do, there often are not enough trucks to carry the loads.

A long recovery

Ward said it is likely to take the industry until at least 2024 to fully absorb the impact of ongoing backloads and labor shortages.

“We’re still dealing with the unknown,” he said. “We come in every week and it’s a question of how many people are going to be able to go to work at the warehouses. If people can’t go to work at the warehouses, then the trucks can’t unload. If they can’t unload, then the loads they were supposed to pick up tomorrow get pushed a day behind.”

Because manufacturing and production of goods and services involves many interdependent processes, a delay in one plant can impact another unrelated plant.

“You may have a food product, but if there’s not stuff to make the wrapper or you can’t get the canister, then you can’t get your product out the door,” Ward said. “This has been really hard on small businesses. If they miss the holiday sales season, for example, or they can’t get product out the door, they may be out of business.”

A domino effect

The fragile state of the global supply chain magnifies the impact of weather or other issues that cause temporary slowdowns in the supply chain.

“There was the February freeze and blackout in Texas last year,” Castro said. “We had some chemical plant shutdowns, and that hit supplies of plastics and other products. There was a fire at a factory of one of the world’s leading auto chip manufacturers and that added to the trouble of auto manufacturers, which had already slowed production because of the semiconductor shortage.”

Ward agreed. “A fire in California or a tornado in Oklahoma or Kansas disrupts the whole supply chain,” he said. “We’re not in a position to have any of those things happen right now because it just puts us further behind.”

Labor shortages among truckers is also a significant factor in the current supply chain crisis, Ward said. Those shortages are not only the result of changes in attitudes related to the COVID pandemic, but also because of poor driver pay.

“Until we decide to pay drivers better, we’re going to struggle to get drivers,” he said. “Drivers want to be home with their families, and so they’re going to work in construction or other jobs where they can be home at night. That affects all of us.

“For example, Tyson [Foods Inc.] typically ships out 19,000 loads a week, and they’ve only got capacity for 10,000 or 12,000, because they can’t get the trucks,” Ward added.

Setting expectations

It’s likely that the supply-chain industry has permanently changed, Castro said.

“There’s a desire to get back to normal, but I’m not sure normal is what the expectation should be,” he said. “I think the expectation should be stability — something we can count on and something we can forecast on. Managing expectations will be the responsibility of everybody in the supply chain. Staying current with a rapidly changing global supply chain is going to be critical.”

Castro said getting back to a more stable supply chain will require stability in the labor market.

“A consistent workforce will allow many of the other critical things that need to be done in the supply chain,” he said. “You can have a plan, but you have to be able to have the talent to execute that plan.”

Ward said consumers and businesses may also have to accept that prices will be higher and business margins may be lower than they were pre-pandemic due to a need to increase wages to attract enough drivers and other key staff in the supply chain.

Until there is more stability in the supply chain, companies should optimize their supplier networks, create redundancies, control costs and focus on more accurate forecasting, Castro said.

“It’s important to gain a broader understanding of the limits of your current supply chain,” he said. “You’re only as good as the supplier’s ability to get you the products you need to execute your plans. That leads to managing inventory and managing supplier relationships. It’s going to require ongoing communication and ongoing collaboration to address an ever-changing supply chain.”

To learn more about Logisticorp, visit logisticorp.com.

To learn more about MW Logistics, visit mwlogistics.com.