You can’t read the news, chat with friends, or walk through a store lately without hearing about the supply chain. Consider that bizarre stretch of 2020 when no one could get toilet paper. Remember that sorta-funny but heckin-problematic time a shipping container blocked the Suez Canal in 2021? Now it’s 2022 and we still can’t get our hands on our favorite sparkling water with any kind of reliability. What on earth is going on?
The supply chain crisis has been in the spotlight since the pandemic began, but it was on track to hit potholes since long before then. Now everything is costing more and inflation is on the rise — we’re feeling the squeeze on everything from necessities like diapers to larger nice-to-have purchases like cars and furniture.
So the supply chain is cramping your style, but how, exactly, does it work? What do global shipping logistics have to do with your struggle to find random grocery items in a given week? While we may be at the mercy of the supply chain for the foreseeable future, there’s no need to feel clueless about why. Here are five key tips for better understanding.
1. This didn’t happen overnight.
The state of supply chain affairs didn’t begin with the pandemic, though that’s when most of us started to notice something was amiss.
This started as far back as the 1940s when post-war economics expanded the production of American products to a more global economy. After the U.S. began shifting more of its sourcing and manufacturing offshore, other countries took up production, and advances in technology, transportation, and refrigeration built an impressive global supply chain over the decades, with goods moving faster than ever from point A to B.
Over the course of the next 30 years, America went from producing its own agricultural products, vehicles, clothing, and electronics to sourcing these things from more cost-effective markets.
2. You mean we’re not sitting on a supply of the products we’re all used to accessing easily?
That’s right. While we have been used to grocery shelves that are always stocked with paper products, that seamless supply simply meant that things were running smoothly. The minute a factory missed one week of production, retailers found themselves thrown off by shortages. Because output and shipping had become so efficient and seamless, storing mountains of inventory made less and less sense. What did make sense was to hold just enough supply to match consumer demand — and to keep a pulse on that demand, ordering more goods as they were needed.
“Producers of products moved to an on-order basis. You only had enough inventory in the pipeline to support a couple of weeks of sales because you replenished based on your sales volume,” explains Bob Crosslin, a private supply chain consultant based in Dallas, Texas. And while a product might go out of stock, “It really wasn’t that big of a deal because there was plenty of product available in the pipeline.”
3. Until there wasn’t. I see it now: All this works until COVID hits.
As perfectly as the supply chain was working, all it took was a single global disruption to really throw things into chaos. And you guessed it — it’s now going to take years to recover.
As the pandemic continues to disrupt factory operations, flights, and shipping schedules, the carefully-orchestrated balance of producing a supply to meet demand will falter. Sure, toilet paper isn’t an issue today, but Bluetooth headphones now seem to be in short supply?!? It’s almost impossible to predict which goods will fall out of sync with shifting demand in a given week (or month, or quarter.)
Think about it this way: A glitch in the production of a single computer chip may impact your ability to get everything from a laptop to a car… And because components for everything these days are sourced globally, delays in one place can delay production happening in another country, which delays shipments happening in yet another country.
4. Demand has changed.
Have you swapped your business-professional wardrobe for yoga pants? Your gym membership for a Peloton? Your restaurant addiction to a meal kit subscription? So has the rest of the world. (Well, not everyone, but you get the picture.)
A home office has become the hottest commodity for folks whose worksites have closed permanently. Are you canceling your family vacation for the third year in a row? Maybe a hot tub and patio renovation are more appealing than they once were. The game and its rules have changed, and the supply chain is still stumbling as it tries to keep up. Not to mention that different parts of the world are shutting down and opening up in rapid rotation.
“It’s creating an environment where you can’t get the items produced,” explains Crosslin, “because of labor or raw material shortages.” Even if supply is available, a guaranteed workforce at the right day and time isn’t. “If we were self-sufficient as a country, we would have gone into [something like a pandemic] with higher levels of inventory. Looking over the last 50 years at all the efficiencies that have been made, nowhere in the calculation did anyone ever consider what would happen if there were a pandemic that affects the worldwide supply of goods and services.”
5. This isn’t a simple situation. Which means the resolution won’t be simple either.
With something as tightly and efficiently rigged as the supply chain, the term “domino effect” comes to mind. Production was optimized for a pre-pandemic world, and it took decades to get that way. Now we’re struggling to cram a generation’s worth of evolution into an unsteady global market, and it’s not exactly running smoothly. Go figure.
So what’s next?
While an unstable supply chain may make your shopping trips feel like a dumpster fire, there is a silver lining: the economy is recalibrating in a huge way. For starters, short supply is great for business — the stock market has done incredibly well in recent years, which bodes well for both your brokerage account and your retirement portfolio.
And with more people working remotely, workforce mobility is on the rise. “There are more opportunities now than ever before,” Crosslin says, “if you know where to look and if you’re willing to engage.” Rapid evolution means a chance to shake up your lifestyle. You may have once been tied to a brick-and-mortar office, but you may now have the freedom to remote into work from a cruise ship or your RV. Supplies may be tight, but it’s time to dream big about how you want your life to look — now, while radical change is in motion.
And while you’re mulling over a world of possibilities, maybe grab an extra jar of your favorite pasta sauce. Supply is, at least for the moment, not a guarantee.
MORE ON HERMONEY:
- The Hidden Risks of ‘Buy Now, Pay Later’ Services
- 3 Bad Spending Habits to Kick to the Curb Once and For All
- How to Make Fast and Cheap Furniture Purchases Even With Supply Chain Problems
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