Supply chain problems are expected to inflict hardships on manufacturers, retailers, and consumers this holiday shopping season. Those problems will continue well into the New Year, warns Nada Sanders, distinguished professor of supply chain management at Northeastern.
”We are going to have a very, very lean holiday season, with limited supply on the shelf,” Sanders says. “The holidays are going to be dismal, with not enough inventory and long lead times, and it is not going to magically improve come January. Those shelves will not be replenished.”
The shortages are the result of numerous factors that cannot be put right in the short term, says Sanders, including the COVID-19 pandemic, transportation bottlenecks, labor shortages, inflation caused by unmet consumer demand, and climate change.
“We are going to see restructuring of global supply chains in different ways,” Sanders says. “But that isn’t going to play out until 2023.”
Sanders spoke with News@Northeastern about the supply-chain crisis and a potential response by government and business leaders that could mitigate the damage. Her comments have been edited for brevity and clarity.
What instigated the supply chain problems?
It started with the COVID-19 outbreak and the shutdowns in China and Asia more broadly. Global supply chains had very little inventory in the pipeline because supply chains were operating ‘just-in-time’ where little inventory is carried and the system is lean.
Following the shutdowns, it was going to take a few months to repopulate the supply chain and get it moving again. But then we had changes in consumer demand in the U.S. and globally, which disrupted the supply chains further.
And then, after the vaccines were introduced, we had this massive pent-up demand by consumers who suddenly wanted products when there wasn’t enough product available. And so the supply simply wasn’t able to keep up with the demand.
On top of all that you have the ongoing COVID-19 outbursts and new protocols around the world that are resulting in extra paperwork and other issues that are contributing to the backlog.
How have labor shortages contributed to the problem?
You don’t have enough labor to unload the ships that are coming in from Asia. Vietnam is just now easing lockdowns due to COVID; a lot of apparel comes from there.
A lot of these labor issues were impossible to forecast because they have to do with emotions. U.S. statistics indicate that the pandemic has led to issues of burnout, where the workforce is saying, “What is my life worth? What is it that I want to do with my life?”
Supply chains are not just about things. They’re also about people—the laborers that are needed to unload and load supplies and work in the warehouse and drive trucks.
What will this mean for the holiday shopping season?
People who have more disposable income and businesses that have more cash are going to do better. Because prices are going to continue to go up.
Some businesses like Walmart are chartering their own ships to move their cargo. Last week somebody who runs a smaller trucking company was telling me that for every cargo load available, he had a demand of almost three equivalents of cargo loads. And it’s going to get worse.
We are at a tipping point—an exacerbation that is not going to abate.
How will supply chains be adapted to deal with these issues?
You’ll see more manufacturing, where possible, that is closer to point-of-sale. You’ll also see products being redesigned to use different materials that can be sourced more easily. But that’s going to take time. It’s not going to take effect until 2023 that we’ll get restructured global supply chains.
How are government and business leaders responding?
Political leaders, policymakers, and business owners need to start thinking of this system in a different way.
The problem is not just one thing but a confluence of many things. It is a deadly mistake to not see all of these pieces coming together. And it’s going to get worse because of the need for labor, and especially for skilled labor.
In the U.K., Prime Minister Boris Johnson has mentioned training citizens to be truck drivers. Well, lots of luck: Even if you could find willing people and you could pay them well, he doesn’t understand the skills that are needed for this type of labor. It takes time to learn how to drive a semi.
It’s not just Boris Johnson. It’s everywhere. These issues are happening across the board.
What should be done to take on these problems?
We need to get thought leaders from different disciplines together to look at this in a systematized way.
Let’s say you take somebody from the military who is a logistics expert. You marry that with somebody who deals with labor, and somebody who understands climate change—which I say because, for example, the wildfires in Oregon have wiped out a number of Christmas tree farms, which has impacted the supply.
We definitely have not put together a comprehensive, visionary team of experienced people across disciplines. Instead, we have continued to see supply-chain management in a siloed way in terms of moving trucks, which is a deadly mistake. Transport, labor, the global economy and financial impact, economists who are talking about inflation—we’re not marrying all of that with the global supply chain. No one is paying attention.
So we need to bring all these experts together—not too many of them, but not too few—to connect these disparate areas in real time and do forecasting. But we’re not doing that right now.