Supply Chain Shortage: Your Questions Answered – News Couple

Supply Chain Shortage: Your Questions Answered

The sharp rise in demand has clogged the system of transporting goods to the factories that need them. At the same time, finished products – many made in China – have been piling up in warehouses and ports across Asia due to a dire shortage of shipping containers, the standard-sized steel boxes that carry goods aboard huge ships.

In simpler terms, they got stuck in the wrong places. In the first phase of the epidemic, when China shipped huge amounts of protective equipment like masks and hospital gowns around the world, containers were offloaded in places that generally don’t send much product to China — regions like West Africa and South Asia. In those places empty containers piled up while Chinese factories were producing a massive boom of other merchandise destined for the wealthy markets of North America and Europe.

Due to the scarcity of containers and the heavy demand for freight, the cost of transporting goods has risen dramatically. Before the pandemic, it might have cost $2,000 to send a container from Shanghai to Los Angeles. By early 2021, the same flight was fetching up to $25,000. Many containers also hit ships and were forced to wait, adding to delays throughout the supply chain. Even huge companies like Target and Home Depot have had to wait weeks and even months to get their finished factory products onto ships.

Meanwhile, in the ports of North America and Europe, where containers were arriving, the heavy flow of ships overshadowed the availability of berths. In ports like Los Angeles and Oakland, California, dozens of ships were forced to dock in the ocean for days before they could load and unload. At the same time, truck drivers and port workers were stuck in quarantine, reducing the availability of people to unload cargo and further slowing the process. This situation was exacerbated by the closing of the Suez Canal after a giant container ship was stuck there, and then the closing of major ports in China in response to the new Covid-19 cases.

Many companies responded to the initial shortage by ordering additional materials, adding to the pressures on ports and filling warehouses. As warehouses fill up, containers – which suddenly serve as storage areas – have piled up in ports. The result was the mother of all traffic jams.

Anything that is produced or manufactured – from chemicals to electronics to running shoes. Deficiency begets more deficiency. A paint manufacturer that needs 27 chemicals to manufacture its products may be able to purchase all but one, but that substance — possibly stuck on a container ship off Southern California — might be enough to halt production.

Cars use computer chips – many of them – and the lack of chips has made it more difficult to produce cars. This in turn made buying cars more difficult and more expensive.

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