Navigating Supply Chain Issues | Consumer Guide to 2022 Supply Chains

December 17, 2021 9 min read

cargo ships

How Did The Pandemic Affect Supply Chains

The Covid-19 pandemic changed our way of life in 2019. We worked from home, kids learned at home, and nobody left their houses unless necessary.

As our lives changed so did demand for consumer products. The switch to home life tossed us out of our normal routines and changed our consumer behaviors.

As demand for consumer goods increased, manufacturers struggled to deliver on their orders.

Although manufacturers attempted to meet demand the bottlenecks were too great.

Shortage of labor, freight, and materials were all bottlenecks that affected these companies.

Because of these bottlenecks we saw shortages and price increases in all sectors.

now hiring sign

How Covid-19 Affected Labor

When the Covid-19 pandemic started we were all asked to stay home and shut down. The shutdown was only supposed to be temporary but it lasted over a year.

As government officials kept delaying reopening workers began to worry about their wages. To counteract this, governments began to supplement workers' income through stimulus and unemployment.

For many they were making more staying home than they were working. The increase in pay kept many from returning to work creating a worldwide shortage of labor.

With lots of labor needed and no labor available the supply chain started to collapse.

Companies began to backlog orders as they struggled to staff their warehouses. Even when companies could get their products to shipment the labor issues did not end.

Freight trucks sat for weeks in freight yards waiting for drivers to be available. Harbor yards sat still waiting for enough labor to load containers and work the ships.

cargo containers

How Covid-19 Affected Freight

When the Covid-19 pandemic started restrictions on air travel and freight halted transportation. At the same time demand for delivered goods exploded. The increase in demand came from two main factors, time and money.

Western countries began paying more in unemployment than previous wages. With extra cash and time consumers went online and purchased more than ever before.

The increased demand paired with the lack of labor started to strain supply chains.

Struggling to meet increased demands, transporters increased the cost of freight. Overnight freight increased from $1,400 a container to $20,000. With freight prices increasing at alarming rates, prices on commodities began to rise.

High-value manufacturers were able to absorb the costs and pass it onto consumers. For low-value manufactures the costs were too high to continue shipping their products.

This forced many low-value manufacturers to wait for freight costs to drop before shipping.

lumber warehouse

How Covid-19 Raised Raw Material Costs

Some industries struggled during the Covid-19 pandemic while others thrived. The increase in consumer demand caused a surge of growth in the sale of high ticket commodities.

Consumers bought more cars, built more homes, and invested more than ever before. The increased production of high ticket commodities raised demand for raw materials.

With so much demand and so little labor the supply of many of these raw materials became limited.

As production continued to increase the availability for raw materials began to shrink. Producers of raw materials were short staffed and struggled to meet the new demands.

Even when suppliers met demands, freight created another bottleneck for these producers. With little supply and high demand the prices of raw materials increased.

In some cases the price of raw materials increased over 288%. Raw materials like rubber, plastic, and lumber were some of the most affected.

What is Still in Short Supply

A year after the start of the Covid-19 pandemic we still face consumer shortages. The first items to experience a shortage during the pandemic were bread and toilet paper.

These shortages began because of fear causing consumer panic buying. Today the shortages we experience are due to failures within the supply chain.

Over the past 2 years there have been many shortages caused by the supply chain. Although some products are no longer in short supply others still are.

empty food shelf

Food Supply Shortage

In the past food suppliers have relied on just in time supply chains. These supply chains operate by keeping as little product stored as possible.

The goal of just in time supply chains is to deliver products as the buyer needs them. Before Covid, many companies used just in time supply chains.

The benefits to a just in time supply chain were lower inventory costs and less liability. This was a great supply chain for companies before the pandemic. Yet, once the pandemic started the companies that used just in time supply chains ran out of inventory.

Today food suppliers are still affected by their use of just in time supply chains. Processed food suppliers like Tyson are the most affected from their use of just in time supply chains.

With a reduced labor force, food processors are struggling to pack their products. Since these food processors are producing less they are buying less from farmers.

Farmers are now struggling to sell their livestock and crops. With less buyers farmers must slaughter their livestock and destroy their crops.

This caused millions of pounds of meat and crops to disappear from the supply chain. 

With food disappearing rapidly from our supply chain, food storage is the only way to prepare yourself. With long-term food kits that have a shelf life of 25 years, there is no excuse for not having enough food available. And, especially if you have a special dietary need, be sure to stock up early. You don't want to need some gluten free survival food and not have it!

microchip

Consumer Electronics Supply Shortage

Along with food, consumer electronics are also experiencing a wide range of shortages. The consumer electronics shortage stems from a shortage of microchips.

The chip shortages originate from producers in Asia who are not able to keep up with the demand for the chips. The understaffed microchip producers struggle to get raw materials and produce chips.

The high demand for microchips comes from the increased demand of consumer electronics.

Many of the electronic manufacturers avoided shortages until recently. They avoided microchip shortages by stockpiling large inventories of chips.

Yet, many of these stockpiles are running low and we are starting to see electronic shortages. Apple and other manufacturers have already delayed production of new products.

Until the chip shortages resolve, expect more electronics to become unavailable in 2022.

line of cars

Automobile Supply Shortage

The automobile industry took a big hit during the Covid-19 pandemic. The automobile industry struggled because of the complexity of their supply chain.

Automobile manufacturers source parts from many different suppliers before they assemble their vehicles.

With so many suppliers needed automobile manufacturers bottleneck during shortages.

The bottlenecks that affected automobile manufacturers' was the inability to source microchips. Microchips have been in short supply after the demand boom for consumer electronics.

The shortage has crippled auto manufactures because only 10% of the semiconductor plants manufacture automobile semiconductors. This leaves auto manufacturers with little negotiating power compared to the electronics manufacturers.

Because of this half a million less automobiles will reach production this year.

Pharmaceuticals

Drug Supply Shortage

Throughout the last 2 years we have seen many drug shortages caused by the Covid-19 pandemic.

During the pandemic demand spikes for drugs crippled drug manufacturers supply chains. Over 100 drugs were classified as being in a nationwide shortage during 2020.

Many of the drugs in short supply are ones that treat Covid-19 symptoms. The most affected drug categories were vasopressors, sedatives, and injectable solutions.

The distribution of the pharmaceutical companies' was a factor of the nationwide shortages. Pharmaceutical companies distribute their drugs based on a priority contracts algorithm.

This algorithm allocates drugs to the hospitals that have the largest pharmaceutical contracts. This works during non crisis markets but fails when the economy is not operating as normal.

During the Covid-19 pandemic these systems failed and created shortages across the country.

warehouse shelves

2022 Supply Chain Issues

At the beginning of 2020 we were told that it would only take two weeks to slow the spread of Covid. Almost 2 years later we see that Covid-19 isn't going anywhere soon.

With new variants popping up every 6 months we can expect to see more of Covid-19 in the coming year. Another year of Covid-19 means yet another year of supply chain issues in 2022.

Experts like Tom Kelly, instructor of integrated supply management at western Michigan university, have also added their input on what the supply chain will look like next year.

Kelly believes that we will face shortages in every sector of consumer goods in 2022. Kelly expects the increase in consumer spending will continue through the holiday season.

With demands already high, Kelly believes that supply chains will continue to struggle.

Because of this Kelly expects we will see price increases across the board as supply shrinks in 2022.

Washington University director of the Boeing Center for Supply Chain Panos Kouvelis, gives us some insights into what will affect supply chains in 2022.

Kouvelis explains that corporate hoarding is the newest problem the supply chains face.

Companies are now placing extra orders in fear of more shortages. The increased demand for materials creates more strain on freight shipping.

Kouvelis also predicts greater supply chain issues to come in the following year. Kouvelis is particularly concerned about China's energy crisis.

In China energy prices are increasing at the supplier level. This is a problem because China's government caps the price energy companies charge. To avoid losses energy companies have restricted manufacturers' energy usage.

This caused some manufacturers to cut operations by as much as 40%. Kouvelis believes that if China’s energy crisis does not resolve itself we will face more supply chain failures in 2022.

According to economists at the Indiana University Kelley School of Business, labor shortages will continue throughout 2022. Before the pandemic the United States economy added an average of 300,000 new jobs each month.

Over the last 12 months of the pandemic the United States added an average of 450,000 new jobs each month. Professor Bill White explains that total U.S. unemployment sits at 4.5 million.

Yet, there are 11 million job openings available. With new jobs created faster than ever before, the gap in openings to workers continues to increase.

Because of the ever increasing surplus of jobs the end to the labor shortage is nowhere in sight.

warehouse shelves

Preparing for Supply Chain Issues In 2022

Going into 2022 we expect to see a continuation of the supply chain issues we have been facing over the past 2 years.

With labor shortages, and freight delays still unresolved experts expect more consumer shortages.

Going into 2022 the only way to ensure you are not affected by these supply chain disruptions is to prepare.

food storage

Food Storage

With food shortages over the last 2 years food preparation can give you a safety net when the shelves go bare.

Keeping a stock of long term food storage has never been smarter with the ongoing shortages. Creating a food storage stock is simple and will last you for the next 25 years.

It is a good idea to plan for how many days you expect to be without food to ensure you have enough stock. Looking at the past year, we recommend keeping at least a month's worth of stored food.

Keeping a month's worth of food will allow time for supply chains to restock once shelves are empty.

Based on a 2,000 calorie diet you will need about 30,000 calories per person to last an entire month.

solar panels

Self Sustainable Energy

Moving into 2022 we are seeing a continuation of increasing energy prices. Prices for oil and natural gas have tripled since the start of the pandemic.

Oil prices are also creeping towards $100 per barrel. Moving into winter, energy price increases will make the heating season very expensive.

With energy prices rising to new highs many are switching to renewable energy.

Covid-19 has increased the rate at which we are moving toward renewable energy. Joe Biden recently announced his net-zero promise for the U.S. government.

The net- zero promise is Joe Biden announcing that the government will have zero emission by 2050.

As fossil fuels become a thing of the past, adding a source of renewable energy will prepare you for the future.

woman holding a bunch of toilet paper

Essential Consumer Goods

When the pandemic first started we saw a frenzy of consumers buying all the toilet paper they could. In the following months paper towels, diapers, tampons, ketchup, and other consumer goods became scarce.

As these products disappeared it created a frenzy of buyers who cleaned the shelves. The only ones who were not in that frenzy were those who were already prepared.

As we approach 2022 stocking up on essential goods will prepare you for the uncertainty.

We know that supply chain issues will continue consumer goods shortages into 2022. What we do not know is what those shortages will be.

To prepare for this you should stock up on any consumable products you use on a regular basis.

Keeping a stockpile of essential goods will protect you as others panic to find one roll of toilet paper.