Why supply chain issues will continue in 2022

Two very serious issues have combined to create a mega disaster that will impact Christmas, and is likely to last well into 2022.

When the global economy emerged from its coronavirus lockdown induced slumber in the middle of 2020, there was a widespread consensus that things would soon return to normal.

That in relatively short order the global economy would snap back to life and the issues created by its temporary hibernation would be relatively swiftly resolved.

Now as we approach the second Christmas of the pandemic, the resolution of the world’s supply chain issues seems even further away than when they began.

Rather than global supply chains showing a significant improvement after having almost 18 months to recover, by some measures the ongoing disruption is significantly worse than it was this time last year.

While Australia has so far been spared the worst of the global supply chain issues and the ongoing energy crisis, several major retailers have warned households to get their Christmas shopping done.

Challenges just keep coming

An aerial image taken on October 28, 2021 shows cargo container ships and shipping terminals at the Port of Los Angeles and Port of Long Beach. Picture: Patrick T. FALLON / AFP.

In this week last year there were six container ships waiting for a berth to open up at the ports of Los Angeles and Long Beach in the western United States. Today there are 77 waiting at anchor and the issue has turned into a political minefield, as concerns continue to be raised about a potential shortage of goods and further disruptions to American manufacturing supply chains.

These two ports account for 31 per cent of all of America’s seaborne trade and are vital to the economic health of the United States.

But it’s not just backlogged ports and a strained maritime logistics system buckling under the load of record levels of imports. From a shortage of truck drivers to regions with insufficient warehouse space, the American logistics system is struggling to keep up with the enormous inflows of goods and it’s not alone.

Throughout the world nations are facing the challenge of various supply chain issues.

In Japan, automakers have slashed production due to a shortage of computer chips, illustrating how lacking even the tiniest component can bring even the most organised and efficient companies in the world to a screeching halt.

Around 5,000 unfinished cars remain parked outside the Volkswagen Navarra factory in Pamplona. Picture: ANDER GILLENEA / AFP.

In the UK, almost two-thirds of companies surveyed by the Confederation of British Industry (CBI) warned that shortages of components would impact production in the next three months. This is the highest proportion of businesses warning about supply chain issues since 1975, a year when Britain faced major economic stress and widespread strike action.

In China, there is already a long list of challenges from the ongoing shortage of coal to a slowing Chinese economy.

But earlier this week yet another hurdle for global supply chains sprang up, a shortage of diesel fuel in China, prompted by the large scale use of diesel generators due to rolling blackouts and high power prices.

As a result, petrol stations across multiple Chinese provinces are rationing supplies of diesel, in the hope that the shortage doesn’t begin to effect transport logistics and further impact already strained manufacturing supply chains.

The elephant in the room … the pandemic isn’t over

While hopes are high in the western world that the pandemic is largely behind us thanks to the vaccine, in other parts of the world things aren’t so rosy.

In China, the National Health Commission recently cautioned the Chinese public that it expected the number of new Covid cases to continue to rise, warning that the outbreak could spread further.

Officials and medical workers conduct a Covid-19 coronavirus test on a resident isolating at home following the recent coronavirus outbreak in Dexing, in China's central Jiangxi province, on November 3, 2021. Picture: AFP / China OUT.

With the ongoing outbreak currently impacting provinces across China, including the key coal producing region of Inner Mongolia, there are concerns that the outbreak could further undermine the Chinese economy and add to the world’s supply chain problems.

The outlook for Australia

From automotive parts to home furnishings, some retail suppliers have been facing issues getting stock for over a year now.

But as supply chain issues worsen in parts of the world and the spectre of Covid returns to haunt China once more, there are growing concerns that Australian businesses and consumers could be impacted in the coming months and into next year.

In a recent update for shareholders the Endeavour Group, which operates the Dan Murphy’s and BWS chains, warned that global supply chain disruptions were limiting access to some beverages, in particular imported items such as liqueurs and spirits.

Dan Murphy's has warned of global supply disruptions.

RMIT Associate Professor and logistics expert Vinh Thai recently shared his concerns about the impact of supply chain issues on Australian consumers.

Professor Thai said that big delays and more expensive consumer goods are “a big possibility” as we head toward Christmas.

Australia’s internal supply chains are also expected to face hurdles in the run-up to the holiday.

Australia Post CEO Paul Graham is bracing for “significant challenges” as the postal service faces the busiest Christmas season in the history of the nation.

This has prompted Australia Post to undergo a hiring surge, employing 4000 temporary workers in an attempt to ensure that Australians get their presents on time.

It’s not over until it’s over

Ever since the pandemic began there have been promises that the end to supply chain disruptions was just around the corner, that by some arbitrary date things would somehow be resolved.

But as the crisis continues to worsen across multiple industries around the world, those pleasant but ultimately empty platitudes are increasingly falling on deaf ears.

With everything from the European energy crisis to further lockdowns continuing to impact global supply chains, the issues that businesses and consumers face are far from over.

Some experts have suggested it could be as late as the middle of the decade before the issues are finally resolved.

Like so many other things throughout the pandemic, it’s incredibly challenging to predict how a system as absurdly complex as global supply chains will react.

Ultimately, we don’t fully understand the variables and uncertainties that the system faces and it’s truly anyone’s guess when a 2019-like level of normality will finally be achieved.

Tarric Brooker is a freelance journalist and social commentator | @AvidCommentator