Supply Chain Disruptions to Continue Indefinitely | Foley & Lardner LLP
First off, the good news: I was able to buy a new bicycle. This is a tremendous accomplishment since the supply chain for bicycles has been difficult, to say the least, for a long time. We even talked about it here on the Dashboard almost six months ago. But, the bad news: I got lucky. My attempts to get a new two-wheeled ride became almost a 24/7 job and I was more or less lucky to find what I wanted, in my size, from one manufacturer, in Utah. Calls to both local and from far away shops resulted in literal laughs when I asked about inventory for bicycles. In sum, there still are not any available.
And it is not just bicycles. How deep are the troubles? How about this for the latest: energy. Electricity is now impacted by ongoing global supply chain issues. As explained by Bloomberg, “The hit from China’s energy crunch is starting to ripple throughout the globe, hurting everyone from Toyota Motor Corp. to Australian sheep farmers and makers of cardboard boxes.” Other industries facing supply chain shortages: apparel, books, grocery stores, etc. It might make more sense to provide a list of industries not currently impacted by supply chain problems. It looks like things are going to get worse before they get better. We have not hit Halloween on the calendar and companies are already predicting problems with having adequate amounts of supply available for the holiday shopping season. It is so bad, that one candy company could not guarantee they would have an adequate supply of candy on the shelves for the holidays in the United Kingdom. Tired of writing about the issue for so long, the news has resorted to aerial photos to demonstrate the backlog of ships trying to get to port to unload their cargo.
Of course, the Automotive Industry is no exception. On the contrary, our industry might be the shining light of supply chain disruption as the global shortage of microchips continues to plague the industry and hammer sales volumes due to a lack of available vehicles to sell – as is obviously true for anything that uses a microchip (otherwise known as almost everything).
There are so many different reasons for the supply chain disruptions that a quick or easy fix seems too much to expect. Whether it be a shortage of dock workers, a limited supply of raw materials, a limited supply of parts, a lack of labor to manufacture, assemble, distribute and/or deliver goods or something else, there is no one issue that has one available fix. The complexity and interrelated nature of the global supply chain – a strength pre-pandemic – is now a weakness post pandemic. Our world truly has become so small that the butterfly effect can be seen in our supply chains the world over: small changes have nonlinear impacts on our complex systems.
Guessing when this will normalize is difficult, if not impossible. Ideas like reshoring, or increasing inventory levels are not quick fixes. Building a new plant can take years. Increasing on hand inventory levels will help short term shocks, but requires normalcy before stockpiling can occur and even then, few companies would keep months and months of inventory on hand. Investing in technology or better supply chain management through blockchain or other developing systems is not an instant solution either.
For now, this means that prices will continue to be elevated (thanks to the law of supply and demand); product choice will be limited; and we all best hope that essential life saving and life giving items remain available as needed. But, hey, at least I got my new bike.