There is no doubt that the global supply chain crisis has heavily impacted businesses and consumers worldwide. Many businesses were forced to shut down as their supply chain could not simply withstand the added strain that came from this crisis. Even the mammoths in the industry were forced to withstand significant losses and shortages that affected their business to this day.
With that being said, what even is the global supply chain crisis?
What is the Global Supply Chain Crisis? Simply put, the global supply chain crisis is a constant shortage of components and materials that occurred as a result of a slowdown in production. Who was the main driver of this slowdown? COVID-19.
Now, supply chain issues have always been present globally. However, supply chains all around the world were really put to the test in 2020 as COVID 19 had begun to alter the demand for different products and components, in addition to forcing factories to shut down operations due to lockdowns.
Why did this significantly impact the supply chain? Supply chains globally have been leaning more toward the just-in-time system of production, a system that minimizes inventory in order to reduce inventory cost.
While there are many positives to this system, the pandemic has magnified the cons of adopting this system.
When the pandemic first began, we saw lockdowns take place globally. Production had virtually stopped worldwide while demand was still present. Not only was demand still present, for many products and components demand had increased significantly.
Factories around the globe were shut down for months. This had let demand accumulate over time and we still see the effects of this pandemic on the global supply chain 2 years later. An incomplete recovery from the pandemic means we are still feeling the effects of the pandemic on supply chains.
In addition to production slowing down significantly, transportation of components and materials between countries was significantly reduced. Ports were overcrowded. Not enough labor was available to work in order to handle the demand of consumers.
Was COVID really the reason? COVID definitely had a significant impact. However, many argue that global supply chains were quite fragile and very easily disrupted. The crisis was coming but the pandemic sped up the process.
Will the global supply chain recover? Things have already begun to improve. However, the supply chain is far from being back to full efficiency.
There are still numerous factors that are significantly impacting the supply chain such as the war between Russia and Ukraine.
With many countries refusing to do business with Russia, there are shortages as well as increased demand for certain commodities in other countries. The war affects transportation routes, the supply of materials, and much more.
While recovery is expected, the situation could very easily take a different turn due to the global political and economic situation.