(WASHINGTON) — As the U.S. economy struggles to fully recover from the coronavirus pandemic, supply-chain disruptions across the country are driving up prices and leading to a growing shortage of goods.
The supply chain bottlenecks — around the world — have caused record shortages of many products that American consumers are used to having readily available, from household goods to electronics to automobiles.
Moody’s Analytics has warned that problems “will likely get worse before they get better.”
“As the global economic recovery continues to gather steam, what is increasingly apparent is how it will be stymied by supply-chain disruptions that are now showing up at every corner,” Moody’s wrote in a report.
Here is how experts answer some key questions:
What’s causing the disruptions?
Analysts say that the lingering effects of COVID-19 mitigation strategies essentially reduced the production of goods and services, and the supply chain shortages now happening are the result of struggles to return to pre-pandemic levels.
“The result of that imbalance between supply and demand eliminated all the inventory and eliminated all the grease that allows the wheels of commerce to work smoothly,” said Steve Ricchiuto, chief U.S. economist at Mizuho Securities.
Not enough warehouse workers, truck drivers
Economists believe there are several issues at work behind the supply chain shortages, including a growing number of workers quitting jobs key to keeping things running smoothly.
A record 4.3 million Americans quit their jobs in August — the most since the Department of Labor started tracking this data in 2000.
“You have a bunch of sectors that just pay minimum wage and labor is just going to veer over to where it finds the most profit,” said Vidya Mani, an associate professor at the University of Virginia’s Darden School of Business.
The Labor Department in July reported that the warehouse industry had a record 490,000 job openings. Companies such as Walmart, Target and Amazon are going to great lengths to attract warehouse workers with attractive benefits, including free college tuition.
With growing inflation jitters, many large retail employers are increasing their wages to keep up with rising prices, intensifying the competition among companies to make their most compelling job-offers amid the pre-holiday rush to hire workers.
The American Trucking Association in 2019 estimated that it would be short some 60,000 drivers, but those shortages increased due to retirements, and new truck drivers being trained due to COVID-19 closures.
“There is a shortage of drivers, and it is one of several issues contributing to problems in the overall supply chain,” said Sean McNally, an ATA spokesman. “However it is a reflection of the strong demand for goods – and everything consumers buy is delivered in a truck.”
At the same time, economists say large employers preparing to bring their staffs back to work in larger numbers had led to large purchases of bulk items.
So, what happens now?
Supply chain experts say that the best option for consumers right now is to wait and start tapering their demands for goods, or they may ultimately end up paying a higher price once those long-awaited products become available.
“It’s good to be aware of the fact that when we make our purchases that whatever we order is going to land at some point in time,” said Mani. “We see these immediate shortages and we just keep ordering and ordering. A lot of those consumer goods companies are going to just pass on those price increases to you.”
The Biden administration has made a concerted effort to try to close supply chain gaps and has pushed the president’s infrastructure plan as a means of addressing systemic supply chain issues. President Joe Biden announced that the port of Los Angeles would begin 24/7 operations to ease bottlenecks ahead of the holiday season.
“Strengthening our supply chains will continue to be my team’s focus,” said Biden. “If federal support is needed, I will direct all appropriate action, and if the private sector doesn’t step up, we’re going to call them out and ask them to act.”
But experts believe that untangling supply chain woes could take much longer.
How long before things return to normal?
“We are in for at least four to six months for it to actually catch a break,” said Nick Vyas, executive director at the Kendrick Global Supply Chain Management Institute at University of Southern California Marshall School of Business.
“So I think we’re going have to go through the peak seasons with this bottlenecks, and although the bottlenecks may actually move from the ports into the inland, but the delay is, I do anticipate to be continued through the holiday season.”
Disruptions to the supply chain at the pandemic’s onset, which caused months of shortages in PPE including N95 respirators, gloves, cleaning supplies and other critical care hospital equipment took nearly a year to resolve.
The federal government, specifically FEMA, had no clear guidance on the distribution of supply to the states leading to an oversupply of goods in some portions of the country while others experienced severe shortages.
Though the supply crunch is driving up prices, companies now have an opportunity to begin figuring out solutions, given the vulnerabilities that recent supply chain crises have exposed, including the deepening cargo ship gridlocks at the world’s busiest ports.
Gooten, a U.S. based supply chain company, facilitates brands and retailers in using on-demand manufacturing to grow their retail and e-commerce businesses on a global basis.
Companies that utilize on-demand production begin producing products only once they are purchased by a consumer, as opposed to forecasting what the demand for a product might be and then producing a set number of those products.
“We have to start that same just-in-time manufacturing model with everything else we produce, whether its apparel, wall art, home goods, toys we just have to shift our thinking,” said Mark Kapczynski, chief marketing officer at Gooten.
“If you’re a retailer, or you’re a brand and you have ten thousand pieces of, let’s say t-shirts, sitting on a box in a boat how do you sell anything?” he said.
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