The heavy buying during this season of Silver Bells is only one reason Americans will endure an extended season of empty shelves in 2022. That is because of the disruption of a vital element of our country’s lifeblood, the supply chain. Very few have ever heard of “social distancing” in the pre-covid world. Likewise, the concept of a worldwide chain of logistics, the supply chain, was a term known only to specialists in the industry until recently.
Pent-Up Demand and Coping with Shortages
Today, however, this term is in the news every day, and it is a frequent topic of discussion by individuals in local supermarkets all the way to the halls of Congress and the Oval Office. To most consumers, the most visible impact of fractures in the links of the supply chain are understocked or empty shelves and delays in online shipments.
However, for industry professionals and participants in that process of commerce, the disruptions are creating havoc at multiple levels. The initial Covid quarantines and interrupted manufacturing operations created months of backlogs for many items, from basic consumer products to vital electronics components. That production shortage of every type of product is now being compounded by the rapid economic recovery in the United States and other countries.
What is now at work is a classic play between growing demand and stagnant or inadequate supply. The supply chain issues bear on the situation as some warehouses and docks are near bursting with shipments and inventory while other locations face bare shelves and idle trucks. Don Ake of FTR notes this is the “worst supply chain/shortage environment since World War II.”
Demand Exceeding Supply = Inflation
The short-term impact of this situation is not just the inconvenience of having fewer consumer choices. Factories are unable to produce finished products because of inadequate supplies of components needed for everything from cars to phones to furniture and appliances. The resulting shortages drive prices to new highs as companies scramble to fill and refill their inventories.
Industry analysts such as Jim Meil of ACT Research are trying to assess the impact of this situation while looking in their crystal balls for a “return to normal.” Meil reports that semiconductor prices will rise at least four percent this year. He notes that steel prices have already climbed from $650 a metric ton at the start of 2021 and are above $2,000 for that same amount of steel as the year closes. The cost of shipping one full container has jumped from a low to $4,500 to $20,000 or more.
Ironically, those shipping containers, the innovation that made globalization possible, are at the heart of the supply issue. There are now more than 20 million of these metal containers in use around the world, carrying more than half of the world’s trade. With backlogged ports and a shortage of workers, millions of these containers are sitting with undelivered goods around the globe.
Truckers to the Rescue
Ultimately, those containers will come off those ships and out of those ports. That is where the trucking industry plays such a vital role. One upside of this current shortage may well be consumers passing commercial trucks on the highways having more of a sense of gratitude for the role they play in restocking those empty shelves.
However, the trucking industry itself is facing challenges on several fronts. These include:
A growing shortage of professional drivers
Delays in deliveries of new trucks and trailers
Mergers and closing of many large and small commercial trucking firms
The summary conclusions of most industry observers are that this situation will take most of 2022 to clear up. The extended difficulties will put upward pressure on shipping rates and driver compensation for at least the near term.