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So What's the Supply Chain Anyway?
These days, it seems like every item that consumers might want is on backorder or clogged up in industry wide shortages. From hot tubs, to clothes, to carpets, and even appliances, nothing is easy to get in 2021. A consequence of the pandemic, combined with ongoing labor and parts shortage, goods either can't be transported or can't be made in the first place. In 2020, as people were forced to stay home, their habits and lifestyles began to change. Coinciding with these changes was a sharp drop in consumer spending as many brick and mortar stores were avoided. Many people lost their jobs and in turn, their spending power as the economy tumbled into the gutter. Employees that were able to work from home and maintain their jobs actually ended up saving quite a bit of money in the long run after they were forced to cut back on unnecessary purchases and spending. There was no longer as much demand as there was prior to the pandemic. Businesses suffered and adapted to the times by decreasing the volume of production to meet lower than anticipated demand.
However, as 2020 ended and COVID-19 vaccines were distributed, the bulk of lockdown restrictions came to an end. Fueled by market confidence and free cash flow, the economy began to bounce back. Brick and mortar shopping, and especially online shopping, expanded rapidly to meet the needs of burgeoning post-lockdown demand. 2021 brought companies an unexpected economic boon. Corporations that had largely downgraded their production processes were blindsided when they started receiving shipping orders left and right. The global supply chain (which is the method by which transnational corporations receive and distribute goods across a variety of different transportation avenues) was put under serious stress by the expanded need to get goods and products from one place to another. Ports and canals across the world, including the Port of Shanghai, the Port of Los Angeles, and the Suez Canal, have each been crowded with cargo ships desperate to deliver to consumers on the other side of the world. Specifically, back in March, the Ever Given, a skyscraper-sized cargo ship, lodged itself into the side of the Suez Canal, disrupting global trade and creating a five-day crisis that was only mitigated by tugboats and teams of dredgers who were able to dislodge the ship's stern from the side of the canal. This was only a taste of the looming crisis that now plagues us today.
Tens of thousands of cargo ships jam up ports every single day. Goods and products take days, weeks, or months to make it off these ships. And even when the cargo containers get to land, they have to continue to wait at ports to be shipped to warehouses and then wait for transportation from those warehouses and so on. With the holiday season coming up, many Americans are worried that a shortage created by this crisis will impact their plans to give gifts to their loved ones. President Biden certainly doesn't want it to be "The Year Without a Santa Claus." As far as political brownie points go, the holiday season is one you definitely don't want to mess up. As a result of the logistical nightmare that is the management of this supply chain crisis, President Biden is making the Port of Los Angeles operate 24/7 to catch up with consumer demand and free up the already clogged port. Frankly, there should be enough manpower and resources to end this crisis, but the pandemic only served to create an additional labor crisis that has slowed down many aspects of American life including the economy, education, and retail.
There's no one person or group that can be blamed for what has transpired over the past year. The perfect storm of factors coinciding with the pandemic created what has easily been the biggest disruption in trade since the invention of the cargo container. This event has actually taught us an important lesson. Much of global trade infrastructure (including our own) is outdated. We need to redesign the system by which we choose to transport and receive goods to insulate ourselves from another catastrophe like this in the future. Furthermore, the world needs to develop infrastructure that can support the growth of the e-commerce industry. Much of what is driving this crisis is the growth of e-commerce and the decline of brick-and-mortar stores. Don't get me wrong, brick and mortar retailers will continue to be a significant and maybe even competitive rival to e-commerce, but that doesn't mean that we can ignore the rise of the e-commerce industry when deciding how to restructure global trade. If the pandemic has taught us anything it's that the world is constantly evolving and changing. We need to be prepared to confront the challenges and circumstances of the future. The world needs to adapt.
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