What You Actually Need to Know About Supply Chain Breakdowns
What do soy sauce price hikes across China and dry petrol pumps in the UK have in common?
If you’ve opened a newspaper, refreshed a social media feed, or attempted to order a pair of shoes online in the last few months, you’ve probably seen the phrase ‘supply chains’ all over the place — and lately, it’s almost always followed by words like ‘disruption,’ ‘breakdowns,’ or ‘distress.’
Late shipments, good shortages, and higher prices have become a worldwide norm over the past year. This places a serious burden on you if you’re a business owner.
In the US, consumer prices have seen their sharpest increase in 13 years.
What’s putting so much pressure on supply chains and causing prices to skyrocket? Follow this guide to get the full picture and take a look beyond the headlines at why supply chains break down.
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The basics of backed-up logistics
Let’s start from square one. Why is it, exactly, that shipping mishaps lead to higher costs of the goods we use every day?
In today’s globally connected economy, every piece of the supply chain might happen in a different place.
A business shipping globally may have a manufacturer in China, a warehouse in the UK, shipping containers off the west coast of the US, and delivery personnel everywhere in between. Disruptions at any one point in the process can mean serious hold-ups.
And the costs that occur when the supply chain equation isn’t balanced often fall to you.
Supply chain issues are nothing new, however. They can result from both internal factors on the part of business management or external factors that affect entire markets. Generally, they stem from:
Natural disasters and environmental variables, such as delays due to weather or cycles that affect raw materials
Changes in trade laws and other governmental regulations
Transport costs, including surges in gas prices
Lags in technological uptake and poor planning, resulting in an inability to accurately forecast demand or route closures
Any one of these factors in isolation can result in major headaches for businesses, maritime industry behemoths, shipping providers, and customers alike. But when these compound, things get even more complicated.
One other point to remember is the sheer amount of ‘behind-the-scenes’ work it takes to get goods to consumers. While we may never see the containers loaded onto ships that travel the oceans, their smooth entry and exit help to insure our daily conveniences. In times of normalcy, this all remains more or less invisible.
Although the container-ization of our world has been going on for decades, a newer feature is the rise of the age of e-commerce. This puts distribution networks under pressure to keep up with expectations for faster and faster shipping and introduces a model that places the online retail experience above all else.
The COVID supply chain conundrum
As the COVID pandemic has evolved and stretched on, global supply chains are now in trouble. A small break in a supply chain can have a ripple effect that spans continents. Amid constant stops and starts due to regional lockdowns, thousands of breakdowns are having a compounding effect.
For example: in August of 2021, the world’s third-largest port, Ningbo, was forced to close when a single COVID-19 case was detected among its employees. The abrupt closure of the marine hub, located outside Shanghai, drastically affected shipping lines and resulted in massive re-routing. Even worse, goods already docked in the port were stuck for over two weeks.
This comes in addition to another major factor: the cost of the containers themselves. According to a Reuters report, container pricing on the route from China to the U.S. east coast has risen 500%, topping out at over $20,000+ for a 40-foot box.
Such container prices spikes came as a result of ocean shipping companies scaling back during global lockdowns, then playing catch-up when demand for goods from Asia picked back up. With far less cargo space available and higher prices, it comes as no surprise that many businesses have been forced to make calculated decisions surrounding where, when, and how to ship their goods.
On top of it all, COVID has led to labor shortages that affect multiple points of the supply chain. That means fewer people to manage inventory in warehouses, difficulty finding delivery workers, and widespread uncertainty over when ‘normal’ could ultimately resume around the world.
How does this affect the stuck-at-home masses who want their orders faster than ever? A lot of delays, a lot of confusion, and — for better or worse — a re-evaluation of how complicated it really is for a ‘click-to-order’ window to become a box at the doorstep.
Get a flexible logistics partner on your side — through the good and the bad
As a modern business, it’s never been more important to be able to adapt to the shifts happening in both your market and around the world.
If your business is locked into a plan that doesn’t offer room for flexibility, you could get stuck with unused inventory and, ultimately, disappointed customers. At CBIP, we’re here to make sure you can move forward with confidence. We provide the expertise you need to be ready to adapt when market-altering events take place and are ready to evolve with your business in real-time.
With global coverage of sea and air freight and an adaptable 4PL model, our team can help you navigate your global supply chain and craft a specialized logistics plan.
Ready to take the next step and work with a partner who can fine-tune your supply chain? Head to our website to learn more about our services or call us to have a chat today.