Food prices are rising, gas prices are rising, and finding that perfect holiday gift just might get harder.
The reason? Struggles related to our global supply chain.
President Joe Biden on Wednesday revealed plans to help remove bottlenecks in our supply chain, including plans to turn ports into 24/7 operations. Meanwhile, shipping companies FedEx and UPS as well as retail giant Walmart will step up efforts to ease tensions in the supply chain.
“This is the key first step in moving the entire nationwide logistics and freight transportation supply chain to a 24/7 system,” Biden said.
So what is supply chain and why should you care about these issues? Let’s explain:
What is the supply chain?
The supply chain is how we get almost all of the things in our lives that we want and need. It is a system that helps to makeand deliver our favorite products. It involves the manufacturersof these products, the companies that supply the materials to create them, the freighters, trains and trucks that deliver them and the stores that sell them.
“You can think of this as a pipe that connects supply and demand,” said Tinglong Dai, professor of operations management and business analysis at Johns Hopkins University.
It’s also complicated. Take the iPhone, for example. To build one, Apple has supply chains with companies supplying materials for its smartphone, such as Corning, which makes precision glass for the iPhone. Then you have the supply chains that Apple uses to distribute iPhones to you.
“It’s a complex network of different entities working together to enable us, as consumers, to receive our products on time,” said Marko Bastl, director of the Center for Supply Chain Management at the Marquette University.
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What’s wrong with supply chains?
The problems affecting supply chains are linked to the COVID pandemic. Bastl said the pandemic is unique because it has impacted both supply and demand. Some manufacturers are still not performing at the levels they were reaching before the pandemic.
The pandemic has also affected logistics-focused businesses, such as warehousing to store items that travel overseas and transportation like trucks and trains to deliver them across the country, Bastl said.
At the same time, as millions of us are staying at home to help prevent the spread of the coronavirus, we’ve ordered a lot of things from personal computers to sports equipment.
“It’s almost like a perfect storm of loss of manufacturing capacity as well as loss of logistics capacity, coupled with increased demand,” Bastl said.
Why don’t the freighters dock?
One of the lingering images of this crisis has been that of several container ships idle in ports waiting to unload their cargo.
Earlier this week, Biden struck a deal with the Port of Los Angeles to turn them into a 24/7 operation to move ships faster.
Dai said the process of unloading these ships requires a lot of labor and personnel, including warehouse workers and drivers to ultimately deliver these products to retailers.
“We have increased the number of goods coming here in the United States, but we don’t have more truck drivers, we don’t have more warehouse space,” Dai said. “So that’s where these freighters are stuck.”
Which products are the most affected?
Bastl said it depended on the industry because of the different supply chains they use, but he notes that consumer electronics, like personal computers and video game consoles, as well as toys have been most affected by supply chain issues.
Dai said “cheap low-end products” in all industries would be affected as well, forcing us to buy a more expensive item to compensate.
How do supply chain issues affect me?
All of these issues have a direct impact on what we can buy – what is available for purchase. This is why consumers have been advised to start their holiday shopping early. Dai projects, we will see higher prices and fewer products available. And we might see more empty shelves in stores due to shortages and delays, Bastl said.
“The longer these delays last, the more likely it is that the companies involved in the production, distribution and movement of our products will not be able or willing to absorb this cost, and they will begin to push them to consumers,” said Bastl. .
Kelly Tyko and Keira Wingate contributed to this report. Follow Brett Molina on Twitter: @ brettmolina23.
