Pandemic-related shortages are expected to persist into next year

Posted by CopyTeam

 

Throughout the past 60 years, the microchip has influenced the manufacturing of a wide variety of products that touch nearly every consumer these days. From computers to cell phones to cars, the chip is now the most critical and costly component of modern-day electronic devices. However, the majority of chip production occurs overseas, which means that manufacturing and shipping delays caused by the COVID-19 pandemic have created a global shortage. Large corporations such as General Motors, Volkswagen and Samsung report that the current bottleneck in the supply chain could slow production for the rest of this year — or even longer.1

 

What’s the Hold Up?

Delays due to the global pandemic have caused many supply chain problems in the past year. In a recent communication, big-box retailer Costco reported reduced deliveries of a number of popular products such as cheese, seafood, olive oil, furniture, sports equipment and gardening supplies. Basically, inventory shipping from overseas continues to be challenging due to freight container shortages and port delays. As a result, shipping costs have skyrocketed, with higher prices passed on to customers.2

 

Shipping Nightmares

In late March, the situation was exacerbated as the Japanese-owned container ship Ever Given got stuck in the Suez Canal for six days. This created a backup of more than 350 ships waiting their turn to sail through the narrow waterway. Freight vessels either had to wait in a holding pattern or reroute around the southern tip of Africa to get to their destinations.3

 

The Suez Canal sees approximately 10% of the value of global trade traverse its waters, which equals about $10 billion in goods per day. Economists say that the mere six-day holdup may lead to months-long further delays in the global supply chain. In the U.S., we may once again experience shortages of the universally coveted toilet-paper roll. While most imports from Asia to U.S. use the quicker travel route through the Pacific Ocean to California, parts that are shipped from Asia and assembled in Europe are likely to experience the delay of finished products delivered from Europe to the U.S.4

 

Jolly Holidays

Now with the 2021 holidays approaching, many retailers believe that the September to December crunch will be worse than ever. Added to that, the shortage of labor for long haul truckers and freight railroad operators throughout the U.S. is creating a bottleneck situation. According to Forbes, there is currently one qualified driver for every nine job postings.5

 

What products are most affected by supply chain issues?6

 

  • The continual microchip shortage:

    • A worldwide shortage of microchips has forced automakers to slow or stop production of many cars.
    • It will limit the supply of consumer electronics until the end of the year; grab those in-demand products like the PS5 or Nintendo Switch while you can.
    • Other products that are causing industries to feel the pinch include: televisions, appliances like washers and dryers, computers, tablets, cell phones, smart toasters, electric toothbrushes, and the list goes on.

 

  • Publishers:

    • Book publishers are dealing with paper shortages and shipping delays, forcing them to push some fall releases into 2022.
    • Magazine subscriptions could be on the rise due to the paper shortage.
    • Paper bags could run out. So much for some retail chains trying to put an end to using plastic bags.
    • Even envelopes, cards and writing paper could be affected. Would you consider an electronic wedding invitation?

 

  • Toys:

    • This is a huge retail concern for the upcoming holidays. Retailers are already warning of a toy shortage come Christmas.
    • Toy giant Mattel has said that it will raise prices in the next few months, so your best bet is to shop early for that toy in high demand.
    • Retailers like Target, Walmart, and Amazon are looking for workaround solutions to get their products—investing their own containers ships.

 

  • Supply chain disruptions will affect clothing:

    • Clothing Companies like Adidas and Crocs have expressed inventory concerns, as has Nike, which might run out of shoes to sell by Christmas.
    • Department stores and other retailers struggle to fill shelves.
    • The trickle-down affect to discount stores like TJ Maxx and Marshall’s is hitting hard, too. Shipping issues, along with trucking and warehouse workers shortages means shelves will not as full as retailers would like.

 

As inventory becomes more difficult to acquire and the demand of the holidays increase purchase efforts, don’t expect to see nearly as many bargains or sales for these types of products this year—Black Friday 2021 could look very different than in years past. In fact, you should expect to see continual price increases, even into 2022.

 

 

 

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1 Ian King, Debby Wu and Demetrios Pogkas. Bloomberg. March 28, 2021. “How a Chip Shortage Snarled Everything From Phones to Cars.” https://www.bloomberg.com/graphics/2021-semiconductors-chips-shortage/. Accessed April 2, 2021.
2 Grace Kay. BusinessInsider. March 10, 2021. “Costco has a shortage of imported cheese thanks to shipping container constraints and delays at major US ports.” https://www.businessinsider.com/costco-cheese-shortage-shipping-containers-port-delays-supply-chain-2021-3. Accessed April 2, 2021.
3 Matt Leonard. SupplyChainDive. April 1, 2021. “Timeline: How the Suez Canal blockage unfolded across supply chains.” https://www.supplychaindive.com/news/timeline-ever-given-evergreen-blocked-suez-canal-supply-chain/597660/. Accessed April 2, 2021.
4 Paul Davidson. USA Today. March 27, 2021. “Suez Canal blockage could intensify shipping delays, lead to shortages of toilet paper, coffee and other consumer goods.” https://www.usatoday.com/story/money/2021/03/27/suez-canal-shipping-snarl-could-spark-toilet-paper-coffee-shortages/7030623002/. Accessed April 2, 2021.
5 Garth Friesen. Forbes. September 3, 2021. “No End In Sight For The COVID-Led Global Supply Chain Disruption.” https://www.forbes.com/sites/garthfriesen/2021/09/03/no-end-in-sight-for-the-covid-led-global-supply-chain-disruption/?sh=c2d1d263491f. Accessed Sept. 29, 2021.
6 Mike winters. Lifehacker. Sept. 15, 2021. “Willo Supply Chain Issues Really Sabotage 2021 Holiday Shopping?” https://lifehacker.com/will-supply-chain-issues-really-sabotage-2021-holiday-s-1847682085. Accessed Sept. 27, 2021.
Content prepared by Kara Stefan Communications and Thrive Financial Services
4/21-1602413B
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