Why The Pandemic Has Disrupted Supply Chains
Over the past few years, the COVID-19 pandemic and resulting economic fallout has wreaked havoc on the global supply chain. You might have noticed that your favorite products are harder to find at the grocery store or that your online orders take longer to arrive than normal. But why exactly has this been happening?
There are a variety of factors that have converged to create a perfect storm of supply chain challenges. Although the pandemic has slowed down in many parts of the world, organizations will be feeling the effects of the global shutdown for months or even years.
At Unilog, we’re helping our clients navigate these uniquely challenges by developing custom fulfillment strategies. By diversifying your suppliers and making your shipping strategies more efficient, you can minimize disruptions and keep your clients happy during this challenging time. Here’s why the pandemic has disrupted the supply chain so dramatically, as well as ways to improve your shipping strategy during this tumultuous time.
Pandemic-Related Supply Chain Disruptions
The COVID-19 pandemic has had lasting effects on the global economy, politics, and the labor market. Many of these factors came together to create a perfect storm of supply chain disruptions. Here are some of the reasons why the pandemic has disrupted the supply chain.
Supply chain disruptions during the COVID-19 pandemic started as a result of mandated lockdowns in countries around the world. While these lockdowns were necessary for employee health and safety, they also shut down many aspects of the supply chain. For example, many manufacturing facilities, warehouses, and shipping companies were running at a limited capacity for several months at a time.
Additionally, pandemic-related safety restrictions changed over time in relation to infection rates. This means that organizations continually had to adjust their work environment to stay compliant with COVID-19 regulations. Having to continually adjust to changing restrictions meant that many organizations couldn’t operate as efficiently as they normally would.
On top of that, restrictions varied widely between countries. This meant that multi-national organizations had to adjust their strategy to accommodate restrictions in multiple countries, resulting in slower shipping times.
Even after official restrictions lifted and organizations were allowed to resume work at full capacity, labor shortages continued to cause problems. Many companies had difficulties finding enough employees to staff key roles throughout the supply chain. This prevented manufacturing facilities from operating at their full capacity and limited potential shipping options as well.
There are a few reasons why these labor shortages happened. The first is high COVID-19 infection rates. Even after vaccines became available in many countries, the virus mutated, which caused infection rates to spike. When employees fell ill with COVID-19, they had to take up to two weeks off at a time, dramatically stunting production.
Additionally, the pandemic was a catalyst for employees around the world to change careers. In particular, many employees moved away from in-person jobs in favor of remote work. This disproportionately affected manufacturing and shipping jobs, which typically need to be done in person. To fill open positions, employers have had to rethink employee incentives and company culture.
The pandemic caused changes in consumer demand across a variety of industries. Demand for certain products increased dramatically, while others became unnecessary. With consumer purchase patterns changing so drastically, it became difficult for companies to predict the amount of product they would need to make and sell.
For example, many food manufacturers saw their demand tank during the beginning of the pandemic as restaurants were closed. This negatively affected cash flow, which forced them to tighten their budgets moving forward. Limited financial resources stifled production and shipping rates, creating a vicious cycle.
On the other hand, some industries experienced a dramatic increase in demand. One example of this is the microchip industry. Demand for microchips has soared over the past few years, primarily as a result of changes in the auto industry. As technology has advanced, many auto manufacturers have started using computers in the latest car models. While demand was skyrocketing, many production facilities in Asia had to shut down due to COVID-19 restrictions. This created a worldwide chip shortage that will likely last for years to come.
There are also a variety of sociopolitical factors that have exacerbated these supply chain disruptions over the last few years. One of these is strict COVID-19 regulations in China. While many other countries have relaxed their pandemic-era restrictions, China has kept theirs in place. China is one of the largest manufacturing centers in the world, so these restrictions disrupted supply chains across many different countries.
The current conflict in Russia and Ukraine has also contributed to supply chain slowdowns. This has limited air and rail freight options, as planes can no longer travel through Russian airspace and railways through Russia are severely limited.
These issues have caused congestion at ports in northern Europe and in north America. This has caused shipping slowdowns in many parts of the world that aren’t expected to ease up anytime soon.
Managing Pandemic-Related Supply Chain Disruptions
While you can’t fully prevent pandemic-related shutdowns, there are preventative steps you can take to minimize the negative impact on your business overall. Consider diversifying your suppliers and looking for manufacturing options in your country rather than sourcing your products abroad. Additionally, it helps to build up an inventory cushion when possible to prepare for any unexpected delays or shutdowns.
Inventory management technology can also help you prevent supply chain issues. AI technology can assess your current available supply, upcoming orders, and shipping strategy to help you make your supply chain as efficient as possible. Unilog’s Logivice software allows clients to monitor their entire supply chain from end to end to minimize disruptions and maximize customer satisfaction. If you’re ready to optimize your supply chain, reach out to Unilog to see how our 4PL supply chain solutions can work for you.