• Rose Smith

Article: Big Delays and Traffic Jams—How Supply Chains Can Be Disrupted

Photo Source: Wikimedia Commons

Around the world, including the United States, consumers are seeing large increases in prices. In the United States, for instance, the January 2022 Inflation rate reached 7.5% compared to 1.4% just a year ago (US Inflation Calculator). There are a lot of different factors that can lead to high inflation (and depending on which economist you ask, some factors have larger effects than others), but part of it can have to do with supply disruptions. When an economy is having trouble getting goods in, then consumers end up being hit with higher prices or being unable to get them at all.

Supply issues can come in all different stages of transportation, and one of the first ways can simply come from the fact that there isn’t enough of a material to sell, or there’s a mismatch in demand due to hoarding. One of the big sources of this in this past year or so has been the shortage of semiconductor chips (Fast Company). During the Covid-19 pandemic, the demand for cars dropped a lot, since everyone was hunkered down in their homes anyway. Instead, the demand for electronic chips began to shift towards smaller electronics like video game consoles (since, after all, what else was one going to do during a pandemic?). However, once cases and regulations began to ease up a little, the demand for cars started to come back up again, the supply couldn’t adjust immediately, and manufacturers struggled to meet demand for new cars, even causing some manufacturers to hoard chips (in fear of another chip supply shock) and causing an even deeper supply chain issue. This is an example of something called the bullwhip effect, in which a small change in demand can cause big ripples of supply issues down the line.

Sometimes there might be enough of a product, but what if one is having trouble actually getting their stuff into their ports? Traffic jams like these have been popping up across the United States. In February of 2022, a backup of ships in Charleston, South Carolina’s ports was so thick that it was estimated that the backlog wouldn’t be clear until April (The Wall Street Journal). Of course, if there is something you need in one of the backlogged crates, you won’t be able to receive it until the boat actually gets to port. Some of the traffic jam is due to the renewed demand for inventory as demand picks up again, and some of the issues are due to the pandemic. When the Omicron variant swept through the port, 10% of the crane workers had to quarantine, leaving less people to be able to actually receive cargo. As time goes on, ports are beginning to become less congested, but it may take a little while before we actually see a regular shipping flow.

Supply chain disruptions can also be affected by geopolitical tensions. With the Russian invasion of Ukraine, the rest of the world can feel its effects in the supply chain both directly and indirectly. For instance, due to the shipping lines closing up due to the invasion, the largest freight companies are cutting off exports to and from Russia (The Wall Street Journal). This causes certain shipping routes to have to take detours, further causing congestion in ports and furthering the time it would take for a container to reach port. Freight companies also have to take on higher operation costs to be able to safely navigate their ships and trains. Those costs are then passed to companies paying for shipping, and those extra fees can be then passed over to consumers. Actual fighting can also cause supply chain disruptions. For instance, combined, Russia and Ukraine make up approximately 25% of global wheat exports, and Ukraine makes up 13% of corn exports (Market Watch). With the current conflict, the ability to harvest wheat will be severely diminished, so the price of wheat has begun to skyrocket. In fact, in this past week, wheat futures rose 40%, the largest jump on record. This can lead to price increases and shortages.

In this global economy, much of our supply of goods rests on the intricate logistic dance between countries. When large scale events such as war or pandemics come about, this can severely change the outlook and ability to be able to fulfill inventories and orders. When orders are delayed or unable to be fulfilled, prices have the chance to rise in turn, affecting the consumer’s ability to pay for or even receive the goods at all. This can really hit families hard at places like the gas pump or the supermarket. While many of these issues can have large effects on the economy, much of these issues are not permanent, and as time goes on, we can hope to see these issues alleviate. Although the amount of time it will take for things to resolve is unclear, we can hope that it will be sooner than later.

Rose Smith is the blog editor of Twenty-two Twenty-eight. When she isn’t writing about the world around her, she is often found listening to music, watching movies, and going on walks with her dogs.

You can find her on Instagram here and on Twitter here.