Since supply chains rely on people and equipment, delays and cost increases occur when there is a shortage of either. Supply chain disruptions not only create higher prices and scarcity among high-end consumer products, but they also affect basic commodities, such as generic drugs or energy, increasing the cost of living and the provision of basic needs. The following are some contributing factors of the supply chain crisis:
- COVID-19—There is a current supply and demand mismatch resulting from the COVID-19 pandemic. Supply chain problems arose as consumer demand increased and factories suspended production.
- Cyber risk—The COVID-19 pandemic forced companies to accelerate their digital transitions, resulting in more critical data being shared in far-reaching global supply chains. As cyberattacks increase in frequency and severity, they can cause operational, financial and reputational damages that cannot be recovered or repaired.
- Port backlog—Ocean-shipped goods are accumulating faster than workers can move them along, leading to backlogs and elevated shipping costs.
- Truck driver shortage—According to the American Trucking Associations, there are an estimated 80,000 unfilled truck driving jobs in the United States. The driver shortage means that goods backlogged in ports and elsewhere can’t be moved.
- Natural disasters—Hurricanes, floods, blizzards and any natural disaster can disrupt global supply chains by postponing or pausing deliveries, closing ports and canceling cargo flights.
- Production issues—For example, factories closing and increasing technology demands have led to the global chip shortage, affecting auto, gaming, smartphone and medical device manufacturing as well as other technology that requires semiconductors.
Business operations can become costlier, and stakeholder expectations for profit and sustainability may not be met during a supply chain crisis. Companies should put their energy and capital into short-term solutions that will make the most impact on their customers and stakeholders.