Warehouse-Issues

What Is Causing Supply Chain Issues?

Crisis in supply chain issues has recently made headlines–everyone seems concerned and wants to know what has caused this global supply chain crisis. COVID-19 has affected this, but there are other things in the mix. In this article, we will look at the causes of broken global supply chain management.

Supply Chain Problems

To understand the crisis, it’s important to realize that supply chain management is a complex system, and we cannot blame a single connection for the failure of this complex system. Basically, the current situation is a response of a complex system to major changes. Below are some causes of the global supply chain crisis:

COVID-19

The pandemic acted as the catalyst, but it is not the only cause of this crisis. Lockdowns in different parts of the world resulted in fewer workforce resources, and this impacted the production capacity of businesses. 

At the same time, we have seen a change in consumer behaviors due to internet shopping. Companies witnessed an increase in demand for different products due to e-commerce, which puts an additional burden on all the touchpoints in the supply chain, including ports, carriers, and transportation.

Manufacturing and Logistics

Many production and logistical units already work at their maximum capacity, and factories, ports, logistics and production are all expensive. Because of this, production units and logistics must work to their full potential to generate more profits–in other words, they lack excess capacity. 

If the units work at their best capacity, it helps offer cost-effective solutions, but any changes or disruptions will overwhelm the system. So, this makes it difficult to meet the gap between demand and supply in such situations.

Another important aspect is that the situation is not specific to a single or a few points in the supply chain–nearly all supply chains are working at their maximum capacities. To overcome this situation, we need to examine all steps and remove any restrictions. Removing blockages and bottlenecks from the supply chain is a repetitive process because every fixed bottleneck exposes another bottleneck in the supply chain.

Increasing Costs Across the Supply Chain

The cost of raw materials and fuels is rising due to inflation and the supply-and-demand gap. When all costs are rising, inflation becomes a major issue. Inflation is an economic condition in which you pay more for the same product without additional value due to currency devaluation.

During these times, manufacturers must cover up their investments, imposing bigger prices on the distribution channel. Distributors also need to cover their costs, so they push higher prices on retailers. Finally, it is the consumer who ends up bearing the additional costs, which requires them to earn more income to meet their financial goals, eventually demanding higher salaries from employers.

Supply Chain Disruptions

During the pandemic, the supply chain management process was extremely disrupted as the world relied heavily on Asia for manufacturing–China, in particular. With the start of COVID-19 in China, manufacturing plants were shut down and changes in the policies of different countries worsened the disruption. 

After battling the impacts COVID-19 and while the world was still recovering, the conflict between Russia and Ukraine broke out. Both these countries export loads of valuable items to the world, and this conflict majorly disrupted an already broken supply chain. In addition, we are facing massive global climate change, and the adverse effects of the weather also impact the supply chain significantly.

Final Thoughts

Companies need to reconsider their risk and disruption mitigation processes and strategies. In the future, businesses must invest more in building resilience so that they can source from multiple suppliers from different locations, have the backup capacity to buy online quickly, and keep additional inventory in stock at all times.

David Blonski

David Blonski

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