No one is untouched by the continuing global supply chain crisis. That includes our own business and clients. Never before has our company had such a backlog of orders, all due to a lack of supply of hardware. Predictions for the future are not exactly rosy either. The combined effects of COVID, the war in Ukraine, trade turmoil and the growing hostility between the US and China on economic issues are all creating havoc on global supply chains.
Effects of COVID on Global Supply Chain Crisis
The effects of COVID on global supply chains have come from surging customer demand for goods coupled with shutdowns and staff shortages due to COVID outbreaks. More recent shutdowns have been occurring in China as they continue to grapple with serious COVID outbreaks. Strict COVID testing protocols have resulted in jammed warehouses and shipping ports there; worse than ever recorded. In a major Chinese manufacturing hub, trucking costs are up 300 percent as a result of a backlog of orders and a shortage of drivers, due to similar COVID restrictions. As a major supplier of a vast array of goods, China’s shutdowns and testing protocols are having a huge effect on supply chains. These backlog issues are not only affecting China, however, as container ships are backed up in major ports all over the world.
Effect of War in Ukraine on Global Supply Chain Crisis
Ukraine has been a major supplier of nickel, aluminum, wheat, sunflower oil and fertilizer, but with supply lines for these goods blocked, pricing for these commodities has increased dramatically. Fertilizer prices, for instance, are at least 40% higher than prior to the Ukraine invasion with more increases likely. Worldwide food production will be affected by such increases.
Shipping containers normally sent via rail from China to Europe, passing through Russia, must now be shipped by sea, due to sanctions against Russia. Slowdowns and rising prices are the result.
The New Reality
According to Richard Wilding, professor of supply chain strategy at Cranfield University in the UK, managing a supply chain used to involve 80 % dealing with predictability and 20 % coping with surprises. Those numbers have now flipped. Companies are making plans to diversify their supply chains to deal with these disruptions, but the interconnectivity of suppliers is extremely complex. As an example, an automaker might explore options for component suppliers, but overlook the possible issues further up the supply chain such as with the manufacturers of the electronic chips used in those components.
Summary
The key suggestion we can offer our clients is to plan as far ahead as possible for your future IT infrastructure requirements. Have contingency plans in place for when projects don’t proceed according to your desired schedule. Such planning is something BSC can and does perform for our managed IT services clients. Reach out to us today to learn more about our network support and consulting services.
