The Economic Recovery Has Been Snagged by a Supply Chain Crisis.
Factory closures, jammed ports, and a shortage of truck drivers are among the issues plaguing the global supply chain, generating fears that the recovery may be hampered.
Here’s a breakdown of the problem:
As economies reopen and recover from the Covid epidemic, emerging countries have seen an unexpected rise in demand for their raw commodities.
“Raw materials are still mostly coming from growing countries like India and Brazil, where pandemic management is challenging,” said Isabelle Mejean, an economist and professor at Sciences Po in Paris.
Demand for cardboard to deliver parcels has increased as more people work from home and shop online.
As those who are stuck at home desire to upgrade their living space, the construction and furniture industries have seen a surge in demand, with giants like Ikea having problems keeping things in stock.
For book publishers, the battle for wood has resulted in shortages.
A significant concentration of enterprises that change raw materials for use by manufacturers could be another issue. The closure of a US firm that creates specialized plastics for the perfume business, for example, caused major headaches for the entire industry this summer.
Even when manufacturers may substitute some ingredients, it necessitates factory alterations, according to Yann De Feraudy, deputy CEO for operations at Yves Rocher and president of the France Supply Chain trade group.
If you’re unable to do so, “You must order three months ahead of time… Prices will continue to climb until there is nothing left “remain to be used
According to Jonathan Owens, a logistics specialist at the Salford Business School in the United Kingdom, the pandemic has underlined the world’s reliance on manufacturers in Southeast Asia.
To lessen reliance on one region, he advocates for some manufacturing to return to the West.
“So, while the raw materials may still originate from the Far East, the assembly may be done in other parts of the world and then dispersed,” he explained.
Some factories have closed as a result of Covid clusters and lockdowns, such as textile and shoe factories in Vietnam that are causing problems for global brands like Nike and Adidas.
Factory closures at chip plants have produced an avalanche of problems for components like transistors.
According to consulting firm Alix Partners, a dearth of processors has forced carmakers to idle their facilities, costing the sector $210 billion this year.
And Covid-19 isn’t the sole cause of problems: there have been others. The Washington Newsday Brief News is a daily newspaper published in Washington, D.C.