The global supply shortage is here to stay

in September 3rd, 2021
global-supply-shortage

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Economies worldwide are experiencing the highest inflation seen in over a decade. And now, new reports show these record rates will continue into 2022 with the U.S. alone expecting inflation to double by the end of this year. Why?

The biggest factor at play is the global supply chain crunch that just keeps getting worse for a number of reasons.

  • Ports are congested, which one Taiwanese marine executive believes will become the new normal unless the pandemic can be contained. In fact, a record 44 container ships are stuck near California at the main U.S. trade port for goods from China.
  • Shipping costs are also 10 times higher for a number of these global routes. One Chinese warehouse says their clients have cut 60-70% of shipments due to costs, including an American client who has over 70 containers of ready-to-ship goods collecting dust.
  • And raw materials shortages are feeding into the problem, forcing suppliers to source and assemble across much greater distances while wasting money simply moving around parts.

Another major contributor is labor shortages — and not just in America. At a time when demand for Chinese goods is at an all-time high, China is seeing younger workers flock to service jobs that pay better and demand less. The country’s former one-child policy has also shrunk the labor pool, making it harder for the country to produce the cheap goods it's known for. And as costly raw materials have already increased product prices 10-15%, prices are expected to increase even more in light of these labor shortages.

To keep up with demand, some are taking drastic measures.

  • Workers in Vietnam are sleeping on factory floors to keep exports moving (the country is the world’s second largest producer of footwear and clothing). Some reports show these factory sleepovers also help protect workers from COVID outbreaks.
  • Toyota is suspending output at 14 of its plants in Japan, slashing production by 40% as supply disruptions (like chip shortages) continue.

🎬 Take Action

When supply for goods decreases, it’s tempting to go buy all you can find — but hoarding can have a negative communal impact. Consider cautious spending for just what you need.

Our Sources:

  • Fortune (Where we found this story) 1 week old | 9 mins long
  • Wall Street Journal: Labor pains for Chinese factories 1 month old | 11 mins long
  • Bloomberg: Factory sleepovers in Vietnam 1 month old | 8 mins long
  • Wall Street Journal: China raises prices for the world 5 months old | 10 mins long
  • Business Insider: Ships stuck at California port 3 days old | 4 mins long
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