Why is There a Global Supply Chain Crisis?

It’s been one thing after another since the pandemic started. Now, we are experiencing an extended global supply chain crisis that no one was prepared for at the start of 2020.

A global supply chain crisis means supply chains are continuously having to deal with one issue or another. At the start of the pandemic, all anyone wanted to do was see the end of Covid-19. However, just as we were close to it, Russia invaded Ukraine. Europe and many parts of the world are still reeling from that move.

Again, just as we were figuring out how to manage that particular issue, the war between Hamas and Israel began.

Why Is There A Global Supply Chain Crisis?

As you can imagine, supply chain crises come with unprecedented market disruptions and fluctuations.

The last fifty years have seen many countries elevated from the third-world bracket. This has led to these countries enjoying a significant rise in purchasing power and ultimately increasing demand. Supply chains ultimately became more global, complex, and collaborative to meet these demands. So, it’s safe to say that the approach has been effective.

However, it has left supply chains open to the ripple effects of disruption in an increasingly interconnected world.

From the recent pandemic to the “military exercise” between Russia and Ukraine and the war between Israel and Hamas that is threatening to pull the entire world in. The question businesses and supply chains are asking is when would it end?

Economic Crisis

So many Nations had to shut down their economy to fight the pandemic.

Some were shut down partially, while some were shut down totally. Unsurprisingly, shutting down economies had negative consequences. People lost their jobs, and some businesses went bankrupt. Understandably, in their bid to control the economy’s downward spiral, countries had to offer palliatives in cash or kind. The problem is that many countries, especially those in Africa, are still trying to recover from this setback.

The war between Russia and Ukraine and that of Israel and Hamas has also led to an economic crisis for Nations, especially in Europe and the Middle East.

Essential items like gas and fertilizers are seeing their prices skyrocket. Which is affecting critical sectors of the economy. For example, manufacturing, power, and transportation, among others. The Houthi Rebels, which for all intents and purposes are a direct consequence of the war between Israel and Hamas, have made international trade and shipping quite the challenge.

In the end, it is supply chains that pay for the price.

Geopolitics Gone Wrong

In the past, there have always been short bouts of disruptions in supply chains caused by one reason or another.

However, businesses could always handle them through supply planning and forecasting. The problem with the current global supply chain crisis is that there seem to be several disruptions coming at the supply chains simultaneously. The crisis also impacts key trade routes like the Red Sea.

There are many reasons for these disruptions, but there is no perfect solution so far.

The pandemic and the current “military exercise” between Russia and Ukraine are the origins of these disruptions. But there are many more reasons that have led to the global supply chain crisis.

Scarcity of Resources

The scarcity of resources is also a huge contributor to the global supply chain crisis.

The recent skirmish between China and Taiwan and the sanctions on Russia have made it difficult for businesses to get the right resources. It is more painful because these resources are needed for production. Take, for example, farmers. They are finding it challenging to get fertilizers for their crops, leading to poor outputs compared to previous years. Poor food output will lead to a food shortage, affecting people and supply chains that rely on those foods.

Because of the scarcity of resources, supply chains are constantly having downtimes. Making them unable to meet their demand obligations.

Logistic Challenges

Logistical and shipping challenges are major issues contributing to the global supply chain crisis.

For example, closed borders, freight issues, including insecurity, and driver shortages. Shipping routes through Russia to parts of the world like Europe are compromised. The same thing across the Middle East. Ultimately, this means longer shipping routes to get the products to where the customers are.

Major ports worldwide have backlogs, which is bad enough, but they don’t seem to have the workforce to get ahead of it.

Closed borders slow down the supply chain process considerably. Freight issues like a shortage of truck drivers and poor infrastructure make it difficult for supply chains to meet their obligations. There seems to be a major hurdle for supply chains to overcome at every stage of the logistics and transportation process.

How To Tackle Supply Chain Crises?

Since we have some idea of why there are supply chain crises, we can recommend some solutions for tackling them.

There are a few ways to combat the constant disruptions. But it is not for only supply chains to figure it out. Government and companies will have to play their part.

Localization of The Supply Chain

Localization of the supply chain might be making a comeback. There is a nearshoring boom happening across the globe, and many businesses and supply chains are leveraging it to bridge the demand and supply gap without having to battle high transportation costs and levies.

Improve Collaboration With Suppliers

Supply chains must improve communication with suppliers across their supply chain network. It will boost the resilience and visibility of their supply chains. Supply chain visibility allows the supply chain to identify challenging areas on time. This allows supply chain managers to take prompt action to tackle these challenges.

Real-Time Use of Data to Predict Supply Flow

It is all about data. Demand, economic, logistics, and supplier data are necessary for effective supply chain planning. Investing in real-time technology that will analyze demand data can help supply chains accurately forecast demand. And plan against future disruptions.

Government Policies

Governments worldwide can enact better policies to help combat supply chain disruptions. Policies that help free up the border and significant ports can go a long way to tackle these disruptions.

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