What Caused the Supply Chain Crisis?
The vast majority of the lingering issues throughout the supply chain were initially caused by pandemic-related shutdowns and delays. The initial shutdowns have since snowballed, exposing long-term problems throughout the transportation and logistics industries.
Throughout the pandemic, many consumers shifted from service-based spending (like restaurants and live entertainment) to household items and personal technology. In the meantime, manufacturers struggled with staffing and raw materials shortages. This dramatic increase in demand for items shipped to homes, including a rise in bulky and heavy items, led to a huge discrepancy in supply and demand.
Manufacturers aren’t the only ones struggling; exporters, shippers and transportation companies are all dealing with similar issues of labor and supply shortages. There is an estimated shortage of 80,000 truck drivers in the United States, delays at every port across the globe, container shortages, a lack of chips needed to produce transportation equipment and much more.
The Lingering Impacts of Supply Chain Chaos
Due to low supplies and high demands, in addition to increased freight rates and costs of shipping, inflation has skyrocketed to a 13-year high causing serious financial strain on both supply chain stakeholders and end consumers. Essentially every industry is dealing with product shortages, high freight prices and tight capacity across all modes of transportation.
In 2021 many experts expected time to heal the supply chain turmoil, but it is clear now that time will not be enough to resolve the lingering issues. So, what is being done to solve the problem, and what can shippers expect in the coming months?
Global Supply Chain Trend Forecasts
Governments around the world are already working toward implementing policies to ease the strain on global production and trade. The United States government has placed an emphasis on infrastructure funding, and attempted to resolve port delays through 24-hour port operations and potential fees on delayed shipments.
Both governments and private companies alike have committed to more resources for chip production, and investments in artificial intelligence and automation to fill labor gaps and streamline logistics. There’s also been an international trend of moving away from offshoring and toward nearshoring production to avoid the high costs of shipping freight.
While many economists believe there will eventually be a shift back to a service-based economy, it’s not something that will happen any time soon. Eventually prices may decline, but companies shouldn’t rely on that expectation. It’s important to adjust operations and strategies to adapt to the changing market.
How to Adapt to the Current Supply Chain
There are two main ways you can help your company move towards growth in this difficult supply chain environment.
- Reduce Transportation Costs
- Centralize Transportation Management
Reduce Transportation Costs
One of the biggest methods of mitigating operational spend is to reduce the cost of transporting your goods. You can do this through many avenues, including:
Monitoring your lead time
- Shortening your bid cycles
- Building and maintaining relationships with suppliers and carriers
- Using a managed transportation service provider
Be sure to read our in-depth blog for more information on reducing your transportation costs.
Centralize Transportation Management
Centralizing transportation management means approaching your operations with a goal of streamlining your shipping and logistics. This effort will lower your overall costs and decrease the amount of time spent on communications, load tracking and more. Using a dedicated technology or service partner to centralize your transportation management is a great way to establish a competitive advantage and build a scalable foundation for continued growth in the years to come.