Where the supply-chain crisis came from, where it's going, and when it will be over

2:59 AM
A loaded cargo ship at the Yangshan Deep-Water Port, an automated cargo wharf, in Shanghai. Chinese
A loaded cargo ship at the Yangshan Deep-Water Port, an automated cargo wharf, in Shanghai.

-/AFP via Getty Images

  • Retailers are racing to import goods for holiday shopping, but supply-chain snarls persist.
  • Experts say that the conditions could last through next year and that improvement will be gradual.
  • As the crisis rolls on, here's a look at how it happened, what happens next, and when it might end.

Consumers may have recently become aware of longstanding supply-chain issues, but for retailers that have been paying attention, the chaos shouldn't be a surprise.

Supply-chain disruption started more than a year ago as governments' and corporations' responses to COVID-19 created a million small interruptions. That combined with exploding consumer demand is a recipe for a transportation bottleneck in the form of port backlogs that created the famous line of cargo ships off the California coast.

As importers try to shove more goods through that bottleneck, it gets worse. The backlog and the mess of factory closures, labor issues, and equipment shortages behind it has been deemed the "everything shortage" or the "supply-chain crisis."

As the crisis rolls on, here's a look at how it happened, what happens next, and when it will all be over.

What caused it

Lots of things. Raw-material shortages, factory closures, not enough truck drivers on the road, port congestion, high demand for ocean and air shipping, inadequate infrastructure - the list goes on.

Supply chains rely on people and equipment, and if either is in short supply, delays and cost result. Read more about the causes of the crisis:

What companies can do

Since transportation rates are incredibly high and goods harder to come by, companies have to put their energy and cash into getting the stuff that will make the most impact for their customers and on their balance sheets.

Tech can help, but only if it's already up and running. Encouraging helpful consumer behavior, like shopping early, is a popular strategy. Read more about how retailers and beyond are coping:

What's next?

If retailers can get goods onto shelves, the next challenge is getting e-commerce orders delivered. Carol Tomé, the CEO of UPS, has said orders will outstrip delivery capacity by about 5 million packages a day this year. But new players are filling in the gaps. Read about how they and the incumbents are preparing for a holiday melee:

When will it end?

Executives disagree on when the supply-chain crisis will end, but none say it will be very soon. Estimates range from early next year to 2023.

The problem is that the crisis doesn't have clear edges. Even if the ports in Los Angeles and Long Beach clear up, there still won't be enough trucks on the road, or workers in warehouses, or delivery vans out in the streets. And COVID-19 could always cause shutdowns and delays.

Every supply chain is different, but there are some indicators to watch to understand the health of the system in the grand scheme. Experts say those will show the first glimmers of light at the end of the tunnel. Some say they're already starting to show. Read more about how to see them:

Read the original article on Business Insider


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