The pandemic induced supply chain disruption started back in March of 2020, and it’s still with us. Now, with the holidays just around the corner, supply chain challenges will not be going away anytime soon. As manufacturers and suppliers learn to plan and adjust accordingly, consumers’ expectations will pose yet another test for companies.
“From an economic perspective, it’s sort of like a game of musical chairs…The world economy is out of sync because parts of it were forced to go offline when the pandemic started and getting all the industry players back in line at the same time is near impossible.” Former US trade negotiator Harry Broadman
Pandemic induced supply chain disruption: How did we get here?
- The Covid-19 pandemic induced a supply crisis, creating abrupt shifts in product demand, shipping delays and labor shortages.
- Additionally, the much needed and welcome government help checks helped increase consumer demand.
- Shifts in demand and suppliers’ inability to meet it, have caused shortages.
- And to make things worse, some companies are panic overbuying materials, in fear of further larger shortages of products.
- This drives prices even higher as supplies continue to decrease even more. Over ordering exacerbated shortages, just like the hoarding toilet paper at the consumer level.
- As Covid persists and product demand keeps shifting, shortages will stay, preventing markets to reach equilibrium, even at higher prices.
Why Just in Time is not to blame
Contrary to what some public opinions, Just in Time is not to blame for the crisis.
- The Just in time inventory system invented by Toyota, aims at achieving efficiency and better products. Better products mean better quality and thus higher customer satisfaction, not cost cutting.
- Instead of contributing to the supply chain crisis, the Just in Time method allows for flexibility to react. Because keeping inventories lean for specific product manufacturing batches, companies can adjust faster when demand changes for different products.
- Just in Time also helps reduce the financial burden of keeping stock inventory. And as we’ve all experienced, having surplus stock is not a good position when consumer demand for products changes.
When will it end?
- Not yet, unfortunately. With the holiday shopping season almost here, the pandemic induced supply chain disruption might just last a bit more.
- After the holidays, markets might get back to equilibrium by the second quarter of 2022.
- By then, supplies could be able to adapt and plan for new market conditions. This requires manufacturers and suppliers to reach understandings about real demand levels and reduce overordering.
- However, if Covid cases continue, production might get stalled again.
- With the pandemic still around, new school closings and parents staying home, could bring back plant closures and transportation restrictions.
- Then, government might have to provide more help cash, thus extending the crisis through 2023, with risks of becoming even worse.
So, while the pandemic induced supply chain disruption lasts, there’s still more adjusting to do. As they’ve been doing since March 2020, companies will keep learning how to improve their supply chain vulnerabilities and potential solutions. It comes down to continued adjusting to the new business normal, and learning to surf new waves. We at Estafeta USA will continue to work with our customers in finding ways wee can better serve, because keeping your business connected, moves us!