Across the world, manufacturers of everything from cupboards to cars or computers are still grappling with a logistics crunch that has disrupted supplies of essential inputs, threatening the post-pandemic economic rebound and boosting inflation, reports The Financial Times (Sept.7, 2021).
Furniture, the latest sector to feel the supply chain pinch, encapsulates the broader problems. Even giant companies such as Ikea have been affected. The Swedish furniture maker has said it “cannot predict” when normal supplies will resume because of a “perfect storm of issues” that includes a shortage of truck drivers.
Transport is a “nightmare” where even “a screw or small component from Asia can take 3 months”, said one French furniture exec. “We had 16 containers being shipped to the US in June and July and they still hadn’t got through by August. Lead times to the U.S. have doubled.”
Transport costs have soared. Between China and Europe, fees are 7 times higher than last year. To work round that problem, Ikea said it was diverting some supplies on to trains. “We will use rail transport from China to Europe to free up container capacity that we can use to ship more to U.S.,” the company stated. In the U.S., meanwhile, lumber supplies usually transported by truck through the southern states have been disrupted by Hurricane Ida, which created havoc on the Gulf Coast.
Nearly half of EU rubber, machinery and computer producers, and most electrical equipment makers, report supply shortages. Almost 60% of carmakers remain affected. In Germany, where car production is 30% below pre-Covid levels, Volkswagen had planned to add extra shifts to clear an order backlog. But new Asian outbreaks of the Delta variant have shut ports and semiconductor manufacturing facilities there, stymying plans. It’s a common problem throughout the sector. VW believes computer chip supplies “will remain very volatile and strained” through the third quarter of this year. But one European economist believes full normalization will not happen until 2023.
The bottom line: uncertainty remains as to how the stability of global supply chains and the handling of the coronavirus pandemic will develop, especially in China, Europe and the U.S.
Classroom discussion questions:
- Why is there a shortage of computer chips, and what can be done? (See Supp. 7 of your Heizer/Render/Munson text, Capacity and Constraint Management)
- How can companies deal with shipping backlogs?