From Raw Material and Worker Shortages to the Domino Effect
October 25, 2021
Shortages of magnets and microprocessors mean that manufacturers find it increasingly difficult to fulfill orders as they cannot produce enough tablets, phones, and computers. When it comes to plastic, shortages affect manufacturers across sectors, including medical products, personal care and hygiene, and food and beverages. The situation has also resulted in backlogs for plastic cups and other disposable supplies, PVC piping and house siding, and RVs and cars. Coupled with high demand, shortages have resulted in all-time record high prices.
Causes for Product Shortages
Surveys among manufacturers show that many have been affected by the prolonged pandemic and were forced to cut production. This is so because they couldn’t pass on increases to end consumers or because they could not source the raw materials they need. While availability has improved to some extent, one of the biggest problems now is shipping and distribution. For carriers and forwarders, finding containers and trucks has proved increasingly difficult.
Speaking of magnets, which are used to manufacture electronics, toys, and other consumer products, tightened regulations on rare mineral mining in China have resulted in significant shortages. The fact that some suppliers chose not to source mineral supplies not only exacerbated shortages but led to price increases.
The petrochemical industry has experienced a chain of problem all its own, like hurricanes along the Gulf Coast, lightning strike in Louisiana, and winter freeze in Texas, to name a few. All this has resulted in price increases and production disruptions. Reports show that the price of PVC, which is used to manufacture credit cards, medical devices, and pipes has increased by 70 percent. Used for paints, adhesives, and coatings, the price of epoxy resins has rocketed 170 percent.
Finally, recurring Covid-19 outbreaks resulted in factory closures in Vietnam which affected the apparel industry.
In addition to shipping backlogs due to insufficient equipment and containers, the influx of cargo unloaded at ports resulted in worker shortages. For freight forwarders, finding enough staff to unload containers at warehouses and drivers to move cargo has been a challenge. In-land shipping slowdowns have affected the flow of empty containers to major ports in Vietnam and China, making it even harder to get containers.
Both the ongoing pandemic and storms around the globe have affected global material and goods supply. A port closure due to an outbreak or severe weather means that other points across the supply chain get thrown out of whack. In summer, for example, coastal China was struck by a typhoon, resulting is sea, rail, and air shutdowns.
After what manufacturers and carriers have experienced over the last two years, it has proven difficult to make predictions, which is set to change the way of doing business in the long term. On the positive side, both economical indexes and GDP growth look positive, and experts predict stable mid-term demand provided that we succeed in keeping the pandemic under control.