It was the week of March 24th, 2020 when the state of Delaware, where Arkieva’s headquarters is located, announced the work from home (WFH) advisory. At the same time, rules about changed hours for stores, and the closure of various kinds of businesses were announced. Similar advisories were issued at around the same time by various governments around the world. It is now April 20th, 2021, and we are a full year and change into this mode. In this time, we have heard about several product shortages and other issues in the supply chain. Let us try and make sense of some of these in this blog. As I live in the US, my experience is somewhat limited to what happened here.
In the first few weeks, one would find the grocery store aisles empty of food and water. Part of it had to do with the reduced/changed hours of the stores, and the other had to do with panic buying. This is something that happens multiple times a year coinciding with a hurricane or a winter storm. One could argue this was expected.
Then, by early April, we heard about a shortage of Toilet paper. There was a shift in the demand pattern; toilet paper that is bought for household use is different from the one bought by businesses. This was at least partially to blame. A lot of it had to do with people panic buying large amounts of toilet paper. I am sure this led to the usual bullwhip effect. I remember going to a local Costco in late May/Early June and seeing a stack of toilet paper in almost every aisle of the warehouse. It has been mostly OK since then.
About the same time, there was a shortage of sanitizers and cleaning wipes. This was caused by the unexpected surge in demand resulting from the advisory of sanitizing more often. Manufacturers ramped up the production to mitigate this. Many new sanitizer production facilities were set up by different companies that were not even in the sanitizer business. Thankfully, this too has been resolved.
Read More: Supply Chain Challenges in Turbulent Times – The Importance of Preparedness and Responsiveness
The same period saw a shortage of masks and other personal protective equipment. This included the shortage of equipment for medical personnel who were at the frontlines of the fight against COVID leading to news stories about the reuse of such equipment. It took a while, but it seems these issues have been (thankfully) resolved.
As the number of infections picked up, there was an increased demand for the number of tests needed. News organizations reported a shortage of reagents and swabs. In the early days, every cough had the potential of making a person feel scared about them having COVID . Since this was a brand-new disease requiring new types of tests, it was certainly understandable that it took a while before getting the supplies in. Slowly but surely, the supply picked up and it is no longer an issue anymore.
As number of cases and hospitalizations increased, we heard about a real and potential shortage of ventilators, ICU beds, medical personnel, and even morgue space. This led to many make-shift arrangements including ramped up manufacturing of ventilators, new hospital construction, and unorthodox steps such as setting up hospitals in parking garages, tents, and even a Navy Medical ship. As the number of infections comes down, hopefully, this will be a thing of the past.
By June of 2020, there was a real shortage of coins circulating in the economy. Many signs in stores asked for payment through credit/debit card or for exact change. This had to do with two factors: The slowing down of the economy had reduced the number of coins in circulation; and the manufacturing of new coins was slower because of decreased staffing at the US Mint. As the economy started coming back, this showed in form of a significant shortage in coins.
Then came the news of the semiconductor shortage. A particular type of chip that was in short supply (among others) was the display driver chip. This relatively cheap chip is used in many devices. These days, display chips are used in just about everything. During the early days of the pandemic, the lockdowns caused the inventory levels to fall. As the demand ramped back up, the shortage has become painfully evident. There have been talks of increasing production. However, installing new production capacity for semiconductors (think fab) can be a multi-year process. I feel there is more trouble ahead in this chapter. Hopefully, some existing fabs can be repurposed to produce these chips.
The plastic shortage was like the semiconductor shortage. Inventories fell in the early part of the pandemic. Hurricanes in the US in the 2020 hurricane season had caused a good 10+% of the production to be stopped, which was followed by force majeure declarations by several polymer producers. Then there was the out-of-character winter storm in February of 2021 in Texas. This impacted large chunks of production capacity. As demand has started to surge, this has caused price hikes and the effects will likely be here for some time.
As the economy began to ramp back up in the second half of 2020, news started trickling out about a shipping container shortage. The container availability remains in a critical state with news of heavy surcharges and a lack of schedule reliability all over the news. This situation is not going to improve any time soon. Add to that the traffic jam at ports and difficulties from additional hygiene procedures arising from the pandemic and you have the making of a prolonged painful period.
To add further insult to injury, we had the whole episode of a large container ship getting stuck in the Suez Canal. Now, this was not caused by the pandemic; strong winds were reported as the actual cause. Nevertheless, it added to the supply chain woes by disrupting the flows even more. Many ships had to just wait and watch; some even started the detour to go around the Cape of Good Hope. Even though the ship has been moved and the canal is open to traffic in both directions, it is expected that the impact from this will continue for some time.
Both the container shortage and the delays arising from the container ship stuck in the Suez Canal are going to be agnostic in the product shortages that they will cause. Many different supply chains will be impacted by these two situations. An example of this is the shortage of Boba tea, also known as bubble tea. The boba balls come from Taiwan; the tapioca starch used to make them typically comes from Thailand. Since the shipping delays are affecting shipments from Asia to the US particularly hard, this product is seeing a major impact.
And lately, there have been reports of a shortage of ketchup. Because of the WFH situation, a lot of people are getting food delivered at home (or taking it home via take-out orders). These are often accompanied by small packets of ketchup. (By the way, this also increases the demand for plastics used in carryout containers; see above). The demand is high enough that it has led to an actual shortage. Companies have reverted to alternative supplies. The main manufacturers are ramping up capacity, but it will take some time for the situation to become normal.
Last, but not least, let us talk about a shortage of vaccines. This one varies wildly by countries. Some countries have been able to make contracts with suppliers for a steady supply of the vaccine. Others are falling way behind. There is simply not enough supply now to satisfy the overall demand. Hopefully, the production keeps ramping up, new vaccines are discovered, and soon we get to a place where this does not seem like a shortage.
These are some of the examples that I could think of. If you think I missed something, please share in the comments section below.
A rebound in demand is not very uncommon after a suppressed demand period. What is also quite common is that supply chains often adjust to the low levels of demand, and then are a little bit behind in ramping the capacity back up. I talked about this some in my previous blog. Companies that are proactive, pay close attention to potential disruptions, and take early mitigation measures are likely to come out ahead. Any company that is well equipped with early warning systems and makes quick decisions is likely to create a competitive advantage out of this otherwise challenging situation.
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