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    Retail MarTech AI – Learning Videos & Stories
    You are at:Home»Retail»Supply Chain»Supply Chain Crisis»What are the Reasons for Supply Chain Collapse?

    What are the Reasons for Supply Chain Collapse?

    0
    By AM on July 13, 2022 Supply Chain Crisis

    20 Facts About The Supply Chain Collapse

    Based on the Epic Economist Report, Following Points are Discussed

    • Experts are warning that the global supply chain crisis is going trigger a record number of disruptions as we enter the second half of 2022. Things were supposed to be getting better by now. Instead, every new survey, study, analysis, or forecast about global supply chains suggests that we are headed to the most chaotic peak shipping season ever recorded.
    • Companies continue to suffer from a myriad of problems caused by product shortages, delivery delays, and persistent supply chain bottlenecks, often leading them to collectively lose billions of dollars each year.
    • Meanwhile, the vast majority of U.S. consumers are still facing empty shelves, soaring prices, and poor customer experience. New data shows that Americans are getting increasingly frustrated with the rising number of out-of-stock products, price hikes and higher costs for shipping. Every sector of the industry is being burdened by a series of problems caused by broken supply chains.
    Why Global Supply Chain Issues are hitting US Consumers hard?
    • A new study published by the Small Business Association of Michigan noted that 59% of U.S. small businesses have been facing persistent complications in logistics and transport which led 87% of them to face higher costs than before the pandemic, with almost half – 43% – reporting price increases of 20% and more. Due to these obstacles, 20% of U.S. small businesses said they’re still feeling pessimistic about the long-term survival of their operations.
    • The system has been broken so many times over the past two years that industry executives don’t see an end for supply chain problems coming about anytime soon. In fact, many issues are likely to worsen this year, as roughly 40% of workers in the transport sector are threatening to quit their jobs.
    • Truckers collect and distribute over 70% of the goods arriving at U.S. ports around the nation. Such a shortfall of workers could paralyse domestic supply chains indefinitely. Road transport operators are warning about a “perfect storm” for the trucking industry in 2022.
    Decoding the Supply Chain Crisis
    • As the backbone of global supply chains, road transport operators are calling on governments for support to avoid bankruptcies and to stabilise the transport system as a whole. “Right now, driver shortages and drastic fuel price increases have created a “perfect storm” that can further aggravate supply chain disruptions this summer,” said Bob Costello, chief economist for the American Trucking Associations.
    • On top of all that, global container capacity has been dramatically reduced in the past few months, and millions of containers are still stuck outside ports worldwide as congestion escalates. The outlook for the next six months is grim – we’re about to witness the cumulative impact of almost 24 months of continued interruptions.
    • The stress we’ve felt as a result of supply chain problems over the past two years was nothing compared to what we will experience in the coming months. Geopolitical conflicts, extreme weather, slower manufacturing, higher fuel costs, and global inflation will continue to wreak havoc on supply chains – and more importantly, we will continue to feel the impact of all of these problems in our monthly budgets.
    • We can only advise you to stock up while you still can because the chaos ahead will be devastating. And in today’s video, we compiled several facts that reveal the extent of the problems we’ve already faced and the challenges that will continue to aggravate the supply chain crisis as we enter the second half of the year.

    Supply Chain Crisis After Effects

    Supply Chain Crisis Effects

    Based on this Epic Economist Report, Supply Chain Crisis threatens Bankruptcies

    If you thought last year’s shortages were bad, and the price increases were absurd, you’ll probably be very upset to know that the situation is going to get a whole lot worse this year. Our global supply chains are broken, and there isn’t a simple solution to fix it.

    One of the biggest problems we had last year were the lack of enough containers in the right places and the excess of empty containers in the wrong places, which has exacerbated port congestion and delivery delays, and contributed to long lead times, surging freight and transportation costs, increasingly empty retail shelves, and higher prices at the stores.

    The problems associated with the shortages will continue to grow as the new wave of virus cases spreads around the globe. We’re already witnessing a new round of lockdowns, disruptions in production, and widespread factory shutdowns in major manufacturing countries.

    And as our issues at ports compound, industry executives are reporting that there’s a huge buildup of empty containers in the wrong places right now, and travel and movement restrictions are only aggravating the problem.

    As a result, ocean freight skyrocketed by 121.2% from a month ago, with the cost of a single shipping container rising by a further 16.3% in December. The increase is sparking outrage amongst shippers, who already had to cope with a more than 400% surge in freight rates over the past two years.

    Some shipping companies and freight forwarders have seen their net profits rise to unprecedented levels, as they dealt with increased cargo volumes and benefit from higher freight rates in 2021. Amongst them, Cosco Shipping Holdings recorded a profit surge of a staggering 1651% last year.

    All in all, revenues rocketed by 117.5% to $33.24 billion across the shipping industry over the past 12 months. On the other hand, millions of businesses worldwide are deeply struggling to pay higher transportation costs to ship their products or get imports delivered.

    The rate hikes are effectively making it harder for them to stay afloat. On top of all that, road transport prices are also spiking. In the U.S., a shortage of truckers and rising fuel costs are making it significantly more expensive to move goods around the country.

    According to Joel Fierman, president of New York-based Joseph Fierman and Sons Inc., when companies finally find available truckers, they’re having to pay exorbitant fees. “It’s really a pity when your cost for transportation pretty much is as high as your cost for goods,” he said.

    “It’s a terrible, terrible thing that this country is experiencing right now. Nothing in the industry has gone up at the same rate as freight has,” he continued.

    As it gets harder and harder to move goods around the planet, companies are bracing for more steep increases in shipping and logistics prices in the months ahead, and much of these higher costs will be absorbed by consumers.

    The emergence of a new virus variant is only adding more stress to our domestic supply chains, given that some workers are leaving their jobs and others are getting sick. In the food industry, this means trouble for the processing of perishable food items, and most worryingly, it means that more shortages at grocery stores are all but certain.

    Just like two years ago, lockdowns are being re-instituted and panic buyers are clearing store shelves of food staples, such as canned goods, rice, pasta, flour, and – of course – toilet paper. Only this time, things are different.

    Local supermarkets are struggling to get their products into stores because so many staff members have been calling in sick.

    Given that energy prices jumped by 33.3% in December, while gasoline is up by 58.1%, and food prices already rose 31.4% since 2020, inflationary pressures will hit American workers particularly hard in 2022.

    Even though gross pay has increased 4.8% over the past year, real average hourly earnings accounting for inflation dropped another 2%, according to data released by the Labor Department. In short, people’s wages aren’t keeping up with the sharp increases in the price of consumer goods.

    Right now, at least $24 billion in goods are still stuck outside the Ports of Los Angeles and Long Beach alone, according to Goldman Sachs estimates, and our domestic supply chain crisis is likely to persist “at least” through the middle of the year, in the best-case-scenario.

    Unfortunately, given the chaos going on on a global level, these problems will stay with us for a long time. So we should all prepare accordingly.

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    AM, The Founder and CEO of RetailMarketingTechnology.com is an Entrepreneur & Business Management Professional with 17+ Years Experience and Expertise in many industries such as Retail, Brand, Marketing, Technology, Analytics, AI and Data Science. The Industry Experience spans across Retail, FMCG, CPG, Media and Entertainment, Banking and Financial Services, Media & Entertainment, Telecom, Technology, Big Data, AI, E-commerce, Food & Beverages, Hospitality, Travel & Tourism, Education, Outsourcing & Consulting. Currently based in Austria and India

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