Supply chain disruptions will end; when is an open question

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When will supply chain disruptions end? With so many factors at play, forecasting an end game is at best an educated guess.

August 16, 20227 mins
Supply chain disruptions will end; when is an open question

When will supply chain disruptions end? General Motors' 2022 travails epitomize the difficulty of answering that question.

In early February 2022, GM forecast that it would build 25% to 30% more cars than it did in 2021. Computer chip supply shortages that had constrained production for over a year showed signs of easing. "By the time we get to the third and fourth quarter, we're going to be really starting to see the semiconductor constraints diminish," GM CEO Mary Barra told investors, according to CNN.

Less than two months later GM announced a two-week shutdown of the Fort Wayne, Indiana, plant that builds two of its most popular vehicles. The reason: a shortage of computer chips triggered by Russia's invasion of Ukraine. Although Ukraine doesn't make computer chips used by automakers, it is the world's largest producer of neon, a gas required by the lasers used in chip fabrication.

Issues like these make it difficult to predict an end to the supply chain disruptions that continue to trigger shortages of everything from lumber to cream cheese. With so many factors at play, forecasting an end game is at best an educated guess.

In short, the global supply chain is like the block-stacking game Jenga: The removal of a single block can bring the whole structure tumbling down.

Hope over evidence

Even government institutions charged with managing the economy admit that it's difficult to make predictions. In a recent data brief, the Federal Reserve Bank of Cleveland admitted that the sources it relies upon "have noted that their expectations about the timeline for resolution are mostly based on hope rather than on concrete evidence."

Leading experts also disagree. In February 2022, a Morgan Stanley research paper forecast that "production issues for most industries should ease over the course of 2022 and revert to normal by the end of the year."

But in an interview two months later with Seatrade Maritime News, Toll Group Managing Director Thomas Knudsen called the 12-month horizon "optimistic ... it could be all of 2023 also," he said. "The situation hasn't changed, in my view, not fundamentally."

The container problem

The roots of today's supply-chain disruptions lie in a series of bad bets many manufacturers made in mid-2020 about how consumer spending patterns would change during COVID-19 lockdowns.

Assuming that layoffs, spending cuts, and health concerns would stymie demand, many slashed orders and inventories. But it turned out demand didn't change all that much. While some service industries were hit hard, many corporations adapted rapidly to distributed work and kept on chugging. People with jobs didn't stop spending; they simply shifted dollars away from restaurants and sporting events into furniture, exercise equipment, and home entertainment.

Many of the goods they demanded come from China and need to be shipped across the Pacific. That became a problem when COVID-driven labor shortages hit shipping docks and trucking companies, creating bottlenecks in major ports like Long Beach and Los Angeles. Cargo ships that made their way across the ocean arrived at their destination to find that there was nowhere to put their containers. Instead of traversing the ocean, many languished off the coast for days.

The container shortage became so bad at one point that the cost of renting a single container jumped from less than $2,000 to $10,000 or more, with the higher fees passed along to buyers. Many US firms hedged their bets by placing extra orders, creating warehouse overstocks that limited their ability to accept incoming supplies and forcing inventory back to pile up on ports and ship decks.

Unintended consequences

Spot lockdowns, tightened border controls, and shortages of resources needed to run factories continue to have unpredictable impacts. For example, China's energy crisis forced the government to impose consumption caps on heavy manufacturers, which required some to cut operations by as much as 40% in the early stages of the pandemic. While the thresholds have since been lifted, restoring equilibrium takes months. China's "zero COVID" policy continues to be a wild card since the outbreak of a new variant may trigger factory shutdowns with little or no notice.

All these factors have combined to create a self-perpetuating spiral. Supply constraints in one part of the chain have ripple effects elsewhere that are difficult or impossible to predict. Underlying the crisis is the decades-long, cross-industry transition to just-in-time (JIT) manufacturing, which strives to limit inventories by delivering supplies exactly when they're needed. JIT has enhanced industrial efficiency and lowered consumer prices but at the expense of supply chain fragility. Businesses have been working to build back better by diversifying sources and expanding inventory capacity, but adjusting the model takes time and the downstream effect could be higher prices in the long term.

Which brings us back to our original question. The expert consensus at this point is that supply chains will gradually return to something resembling normal by the end of 2023. The caveat is that the emergence of a rapacious new virus variant could change that timeline completely.

The good news is that the post-crisis supply chains will be more resilient and better able to absorb another global disruption. One promising trend has been the emergence of flexible logistics providers that supply transportation and storage services on-demand to accommodate short-term fluctuations. This enables companies to fortify supply chains while still preserving much of their JIT discipline. Let's just hope this resilience isn't put to the test again anytime soon.


If you’re looking for a logistics partner to help overcome ongoing supply chain disruptions and meet changing consumer demands, look no further than Iron Mountain Warehousing and Logistics. With facilities and resources throughout the country, flexible service agreements, and quick setup and onboarding, Iron Mountain is your agile 3PL partner with a legacy of trust.