Supply Chain Disruptions Won’t Resolve Anytime Soon
Supply chain bottlenecks arising from the Covid-19 pandemic are impacting numerous industries, services, and goods. With freight costs at record highs and chip shortages affecting industries like vehicles and telecommunication, the disruption is expected to worsen before it improves. In fact, the supply chain crisis has highlighted just how fragile these networks are, affecting everyone from manufacturers and suppliers to consumers and economic growth.
Things will get worse before they get better
Unfortunately, the supply chain crisis is expected to get worse before it gets better. “Border controls and mobility restrictions, unavailability of a global vaccine pass, and pent-up demand from being stuck at home have combined for a perfect storm where global production will be hampered because deliveries are not made in time, costs and prices will rise, and GDP growth worldwide will not be as robust as a result,” explains Tim Uy of Moody’s Analytics. Increasing consumer demand and freight rates for goods coming from China to Europe and the US, along with a a truck driver shortage, has led to products hitting shelves at slower rates and higher prices. “Supply will likely play catch up for some time, particularly as there are bottlenecks in every link of the supply chain—labor certainly, as mentioned above, but also containers, shipping, ports, trucks, railroads, air and warehouses.” Fortunately, freight transport services are still running to deliver goods efficiently. With flat rate pallet shipping, businesses can ship standard warehouse pallets weighing up to 2,000lbs.
Earnings already affected
Several US businesses have vocalized concerns about disruption-related increasing costs and potentially lower earnings. “No matter where companies are, they are likely experiencing supply chain disruptions, higher input costs and some issues sourcing labor,” said chief global market strategist at Invesco, Kristina Hooper. “However, some companies will be far more impacted than others. … A rise in cost will generally have the greatest impact on low-margin companies, which tend to be found in sectors such as transportation, general retail, construction and autos”. Alternatively, businesses with wide profit margins and small workforces will be least impacted, which includes industries like healthcare and technology.
On a positive note, some shortages (including semiconductors) are expected to improve in the near future. Normal production levels should also be reached by the second quarter of 2022. “However, more general supply chain disruptions are likely to continue in the shorter term, especially if there are additional Covid waves,” said Hooper