Global Supply Chain Crisis


the price of computer chips and other supplies needed to make other supplies for people have gone up. courtesy of Mark Lewis

Azul Farrieta Ruiz

According to Bloom Global, the global supply chain is “a connected system of organizations, activities, information, and resources designed to source, produce and move goods from origination to a final destination—typically from a supplier to an end customer.” Due to numerous factories closing down in 2020 because of the COVID-19 quarantine, factories have been struggling to produce and deliver supplies for stores. This is considered the latest global supply chain crisis.
There are many indicators suggesting this crisis, including a shortage of truck drivers in the US and Germany. CNBC announced that the global supply chain could end up impacting the world more negatively as time goes on. This is largely due to the fact that because the supply chain crisis is global, stores will struggle from a lack of inventory. In simpler terms, some items will no longer be available in a short period of time if the crisis is not addressed. To fix this issue, many individuals suggest stores should reduce sales to prevent people from purchasing a surplus of products and to ensure inventory lasts longer. Supply chain management has always been a difficult task because of its global outreach. The challenge has only increased in the era of industrialization. Every nation now owns an economic stake in several aspects of production, distribution, and consumption worldwide. This means that no company is financially independent, so every decision made by one company now affects associates around the world. This shortage would also affect small businesses. ABC News says that “the most recent U.S. Census Small Business Pulse Survey, conducted between Oct. 11 and Oct. 17, 45% of businesses said they are having domestic supplier delays.” Small businesses will also now be able to pre-order more supplies like the bigger companies and may be affected sooner than other businesses.
The challenges that come with the implementation of a global supply chain are the major cause of today’s business and technological innovation, and it is no surprise that supply chain management is one of the most important business functions in large organizations; it is controlling and streamlining the flow of everything from goods to unexpected disasters. There are two common supply chain management operations: just-in-time and assembly line. “Just-in-time” management means that goods are produced when they are needed by people or other organizations. This means that every product made will be used only until it is finished, so there will be no product sitting idly in a warehouse unused. JIT (just in time) management involves keeping six to eight hours lead time (the amount of time that passes from the start of a process until its conclusion), on all finished products, whereas before, this lead time would be about ten to twelve days. This tight cycle time is achieved through collaboration between suppliers & manufacturers who are usually located near each other, hence the phrase “suppliers as partners.” Partnering with suppliers yields better results for reliable businesses than forcing them to produce under tight deadlines. The globalization of the world has only increased our need for supply chain management techniques. Policies are used to direct actions within organizations, but also determine the organization’s goals beyond its own borders. An effective supply chain policy will necessarily address how to access new markets while protecting existing relationships, managing pricing policies for products that are sold domestically or internationally, etc. Other than COVID-19 being a reason for the global supply chain crisis, the shortage in truck drivers is affecting the situation according to CNBC “there may be 10 truckloads ready to go but only one driver is available, and one-third of those trucks loads aren’t close to full.” The supply shortage also affects the environment because trucks are being shipped out that are not fully loaded, therefore emitting unnecessary greenhouse gases. According to an interview with Financial Times, Jeremy Nixon, CEO of freight company Ocean Network Express, claims that “local governments need to increase spending on critical parts of the supply chain including ports, railways, warehouses, and roads to increase capacity and cope with ongoing demand.” The reason why the companies don’t just produce more supplies is that the necessary materials needed to make more supplies are caught within the global supply chain, leaving every merchant at a loss. The global supply chain crisis is an issue that needs to be dealt with fast or it could potentially destroy the world’s economy, leaving a lasting impact until 2023.