The availability of raw materials represents one of the significant production aspects that are most affected by the interruption in the supply chain. The closure caused by COVID has limited the acquisition and production of metals and plastics. The closures resulted in the reduction of polyurethane and polypropylene production by 10% -15% in 2020 in the United States. Spikes in demand due to limited supply have exacerbated this tension as manufacturers need more materials than average to reduce backlogs, but supply chains are still sluggish as they recover from initial disruptions.
Cost of materials
A direct consequence related to supply chain disruptions is the increase in material costs. The slow recovery of supplies and the soaring demand from other producers favor higher prices.
The high demand will persist until producers are able to fully address their backlogs, contributing to higher prices without an increase in supply. This question could also lead to the bullwhip effect as structures over-adjust as new risks or changes arise.
Higher costs translate into higher consumer spending on the other side of the supply chain. For example, boat prices have risen nearly 10% over the past year as manufacturers have to pay more for raw materials.
Disruptions to the supply chain have driven up freight rates around the world. These higher costs can further strain the economic mobility of manufacturers and contribute to higher costs for end users. This could impact demand, leading to further disruptions. The global container freight price index climbed from $ 1,733 to $ 4,359 between January and December 2020. Tighter restrictions, backlogs and continued delays pushed the index further in 2021 which hit a record high of $ 10,361 at September.
Transportation rates then dropped, but still persist above the $ 7,000 mark. and international tensions create more obstacles in global shipping.globale.
Always linked to the disruptions of COVID, the shortage of labor has proved particularly challenging, with the manufacturing sector causing an increase in the abandonment of work in many sectors.
The continuous disruptions in the supply chain in the manufacturing sector have led to an increase in demand. The increase in demand worsened working conditions making them more stressful as companies rushed to meet demand. Jobs in this sector are already among the most demanding in the world; therefore, these extra stressors cause many workers to quit. These work tensions create even more stress for the workforce, exacerbating the job crisis.
Supply chain disruptions have confused production and demand forecasts. Raw material shortages and complications persist in international transport, affecting consumer demand. Often slow supply chains and low inventory can lead to increased demand, as was the case with the shortage of toilet paper at the start of the pandemic. However, consumers can stop purchasing one type of product due to higher costs. Uneven consumer responses to supply chain disruptions make it impossible to accurately predict changes in demand.
When and how will the supply chain disruption be resolved?
All affected areas, manufacturers, logistics professionals and other parts of the supply chain should tackle similar problems together. One of the important steps is visibility. It would be easier to deal with disruptions if all supply chain partners shared data in real time.
Another important element is the flexibility of the supply chain to respond to this information quickly. This could mean moving away from the lean principles in favor of distributed sourcing, reshoring and creating production.
The data suggests that manufacturers can anticipate supply chain problems for six months, although it may be safer to expect further delays – at least a year of delays and shortages.
Companies needs to anticipate and adapt to outages
Widespread disruptions highlight how impactful supply chain changes across processes can be. Companies need to reorganize their operations to be flexible and transparent, considering the scale of this impact. This would allow them to adapt to upcoming challenges more effectively.
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