2021–2022 global supply chain crisis

The 2021–2022 global supply chain crisis refers to the continuous supply shortages that caused major disruptions in economies throughout the world. The crisis was caused by flaws already present in aging global supply systems that were exacerbated by the global COVID-19 pandemic. Because the pandemic caused worldwide shutdowns, factories were either forced to operate at a significantly reduced capacity or close. This caused shortages in products and manufacturing materials that were commonly in demand. These shortages were made worse by a small percentage of the population buying in bulk, reducing the available supply for others.

During the pandemic, labor shortages plagued the transportation industry, with too few workers available to unload shipping crates and truckers available to move goods. This caused continued supply chain shortages, resulting in a shortage of the raw materials needed to manufacture many goods.

The global supply chain crisis was particularly notable in the semiconductor manufacturing industry. A continuous shortage of Asian-manufactured semiconductors resulted in a shortage of computer parts and automobiles. Consequentially, the value of these products rose substantially, and they became extremely difficult for consumers to obtain.

As of 2022, the global supply chain required significant modifications to resume its previous levels of efficiency. Though time-consuming modernizations were underway, but many experts feared they would take years to complete.

Background

The 2021–2022 global supply chain crisis can be traced back to the beginning of the COVID-19 pandemic. In December 2019, a small number of people in Wuhan, China, began experiencing symptoms of respiratory illness, including shortness of breath and fever. The World Health Organization (WHO) in China noted that the region was experiencing a sudden spike in cases of pneumonia that resulted from an unknown illness. Soon after, the WHO activated its incident management system, and the Chinese government shared the genetic sequence of a previously unknown virus. Soon after, Chinese authorities confirmed that the cause of the pneumonia outbreak was a novel coronavirus.

On January 13, 2022, the Thailand Ministry of Public Health confirmed that the novel coronavirus had spread to Thailand. Two days later, it was discovered in Japan. On January 17, the first reported case was confirmed in Washington State in the United States. At this point, experts were aware that efforts to contain the virus to China had failed, and the novel coronavirus was quickly becoming a global pandemic.

On January 31, the World Health Organization International Health Regulation Emergency Committee declared the coronavirus outbreak a Public Health Emergency of International Concern. By February 8, distribution of COVID-19 testing kits had begun in the United States. By late February, the Italian healthcare system reported being overwhelmed by COVID-19 cases, causing the government of Italy to institute a national lockdown to contain its spread. Other nations, including the United States and China, also began instituting regional lockdowns to attempt to contain the coronavirus.

Because COVID-19 was highly infectious and symptoms did not appear until days after infection had occurred, drastic measures were taken to prevent its spread. Many regions were given stay-at-home orders, during which travel for all non-essential activities was banned. Workplaces that could not socially distance and isolate employees began working remotely or were temporarily disbanded. Many areas instated mask mandates, requiring anyone outside their homes to wear a mask to limit the spread of airborne viral particles.

On March 17, 2020, the first human trial of a vaccine to prevent COVID-19 took place in the United States. The vaccine was developed by Moderna Therapeutics. Several other medical companies were also racing to develop a vaccine that would reduce or eliminate the threat of COVID-19. In December 2020, the first vaccines against COVID-19 were authorized for use in the United States. These vaccines reduced the severity of the COVID-19 virus and the likelihood of infected individuals spreading the virus. Coupled with mask mandates and social distancing, these vaccines reduced the threat of COVID-19 enough to end most shutdowns and reduce regulations by 2022. However, despite these measures, the virus caused an estimated one million deaths in the United States alone and more than six million worldwide.

Overview

In addition to causing widespread death and illness, COVID-19 significantly damaged the global economy. The lockdowns necessary to slow the spread of the virus prevented factories and other businesses from operating for extended periods of time. Additionally, many countries closed their borders during the pandemic, halting the shipment of products and slowing global commerce.

In early 2020, near the beginning of the pandemic, many people sought to limit their exposure to the virus by reducing the amount of time they spent outside the home. The combination of shutdowns and reduced spending caused massive waves of layoffs, as businesses that could not make or sell products were not able to pay their workers. This had a cascading effect, as laid-off workers were less likely to spend money, reducing the income of businesses and causing more layoffs.

Because of the rapid shift in living conditions across the world, the demand for products suddenly changed. The demand for personal protective masks, toilet paper, and certain food products spiked as people transitioned to spending most of their time inside their homes. However, the factories that processed or created these products were operating at reduced capacity or entirely shut down. This caused widespread shortages of important products across the world.

Some individuals began purchasing essential products in bulk because they feared that the supply would soon run out. However, continuous bulk buying from a subset of the population exacerbated the shortages, making it even more difficult for others to find the products they needed. Stores began limiting purchases of high-demand essential goods, such as toilet paper, soap, cleaning supplies, and non-perishable foods. This was necessary to ensure that they could keep products in stock and essential goods were fairly distributed among regional populations.

As the pandemic continued, consumers’ demands continued to shift. As a large portion of the workforce transitioned to working from home, the existing supplies of office equipment were quickly exhausted. This included desks, office chairs, webcams, and computers. Spending on these items were enabled by government stimulus programs, which gave consumers a sudden influx of capital to help them transition to spending more of their time at home. Other businesses that required in-person traffic to effectively generate profits, such as restaurants and event venues, suffered or went out of business.

To meet this sudden influx of demand for essential goods, protective gear, and office products, many Asian factories resumed operation. They began shipping massive quantities of goods into foreign ports, seeking to meet consumers’ demands and generate much-needed profits. However, many regions severely restricted travel along with the number of employees allowed in a specific space to reduce the spread of the virus. As an additional complication, many workers quit their jobs, preferring to stay unemployed rather than risk contracting the disease. These conditions caused a labor shortage. Ports did not have enough workers to unload shipping containers full of Asian exports, and too few truck drivers were available to transport goods. This caused continued supply shortages throughout many Western nations.

As many goods could not be manufactured or transported efficiently, shortages of the components and raw materials necessary to create important products developed. This was particularly evident in the shortage of Asian-manufactured semiconductors, which are necessary to produce computer parts and modern automobiles. Without these semiconductors, automobiles and new computers could only be conducted in extremely limited numbers. Continued shortages caused the effective value of these products to suddenly increase.

Throughout 2022, many experts noted that these vulnerabilities had been present in the global supply chain for years or decades. The global shipping and manufacturing industry had been plagued by mismanaged inventory, a lack of accurate data, and aging shipping fleets. COVID-19 caused a series of disruptions that worsened these problems, forcing the massive global shipping and manufacturing industry to renovate parts of its systems to continue. Because such renovations and modernizations could not be quickly carried out, the global supply chain crisis continued throughout 2022. Some experts feared that the completion of these changes would take several years.

Bibliography

“10 Disruptions That Rocked Supply Chains in 2021.” SupplyChainDive, 15 Dec. 2021, www.supplychaindive.com/news/top-supply-chain-disruptions-2021/611513/. Accessed 19 May 2022.

“A Normal Supply Chain? It's 'Unlikely' in 2022.” The New York Times, 2022, www.nytimes.com/2022/02/01/business/supply-chain-disruption.html. Accessed 19 May 2022.

“COVID-19 Timeline.” CDC, 2022, www.cdc.gov/museum/timeline/covid19.html. Accessed 19 May 2022.

“Global Supply Chain Crisis Could Last Another Two Years, Warn Experts.” The Guardian, 2021, www.theguardian.com/business/2021/dec/18/global-supply-chain-crisis-could-last-another-two-years-warn-experts. Accessed 19 May 2022.

“How the Supply Chain Crisis Unfolded.” The New York Times, 2021, www.nytimes.com/interactive/2021/12/05/business/economy/supply-chain.html. Accessed 19 May 2022.

Moltmaker, Sam. “The 2021 Global Supply Chain Crisis… and the 2022 Solution.” Acceleration Economy Network, 2022, accelerationeconomy.com/business-intelligence/the-2021-global-supply-chain-crisis-and-the-2022-solution/. Accessed 19 May 2022.

“Supply Chain Disruptions: A Timeline.” 3PL Central, 3 Feb. 2022, www.3plcentral.com/blog/supply-chain-disruptions-a-timeline. Accessed 19 May 2022.

“The Supply Chain Crisis Is about to Get a Lot Worse.” Wired, 2022, www.wired.com/story/supply-chain-crisis-data/. Accessed 19 May 2022.