What's Causing Supply Shortages?

Are you concerned about supply chain shortages impacting your store? This article breaks down supply chains, disruptions and the potential causes of shortages. Plus, how Easyship can help you deal with disruptions and stay competitive.

What Are Supply Chains

A supply chain covers all the steps involved in producing and delivering a product. If the steps cover more than one country, then it can be defined as a global supply chain. A basic example can be a t-shirt business that sources the raw materials, in this case, cotton from India. It then manufactures the product in Mexico and sells the end product to customers in the US.

Most modern supply chains are complex and cover multiple countries, plus have many steps. To break down the potential steps to analyze disruptions, the fundamental parts of an eCommerce supply chain are usually:

1. Extraction of raw materials
2. Manufacturing the materials into basic parts
3. Assembling the basic parts into finished goods
4. Sale of the finished product to the end customer
5. Delivery of ordered product to end customer

Several actions need to occur between each of these steps, further spreading the network of connected resources, information and organizations involved in a store's supply chain. These include:

• Contracts and other paperwork that details responsibility throughout the supply chain
• Movement of goods from one location to another
• Storage of goods until required
• Inventory tracking and management
• Supply and demand forecasts
• Clearing of customs
• Distribution of goods to the end customer

What Are Supply Chain Disruptions?

A supply chain disruption is anything that stops a product from reaching the end customer. As supply chains become increasingly complex and interconnected, any sudden change or crisis, whether global or local, can have a major impact.

An interdependent chain with many intricate moving parts can experience supply disruptions and inefficiencies at any stage, with effects rippling out throughout the rest of the chain. When looking at supply chain issues, there are two main factors to consider:

• The probability of an event occurring
• The severity of the event's impact

Why Is There a Supply Chain Shortage?

While these supply chain problems are specific to every individual store and every industry, there are some key reasons that you might experience a wider global supply chain crisis and supply chain shortages in 2023.

Cost of Living Crisis

The rapid short-term inflation of the prices of household goods is leaving consumers with less disposable income. Expectations that consumers will spend less and lead to a drop in demand for consumer goods and services is leading to supply chain uncertainty.

With businesses required to create detailed demand forecasts in advance, if there is sudden increased demand and short supply, this can lead to empty store shelves for a long time. Stocking in this uncertain economy can present a range of difficulties, however, with demand planning tools becoming increasingly advanced, effective ordering from production facilities can be achieved.

Industrial Action

With the cost of living increasing, many countries are experiencing prolonged labor unrest, as workers campaign for pay increases in line with inflation. Industrial action can directly impact supply chains, with ports, railways, air freight and truck drivers some key transportation industries that have been impacting delivery times. There are some key ways for businesses to minimize risks from labor unrest:

• Avoid affected points
• Avoid carriers with a history of poor labor practices
• Integrate automation

Related post: Supply Chain Optimization: 10 Tips To Get It Right

Energy Crisis

The global energy crisis has been getting gradually worse. From the war in Ukraine to oil and gas production disruptions, plus sanctions and even OPEC+ members restricting supply. Rising energy prices can have a direct impact on supply chains, leading to logistics disruptions.

Warehouses and logistics operations require large amounts of energy due to the heating and cooling of large buildings, plus powering equipment. Alongside this, transportation costs associated with running large fleets of vehicles and moving freight also increase.

When supply chains are long, these inflationary pressures can be compounded along every step that is exposed to energy price increases. These costs can add up, with businesses reducing production and in the worst-case scenario, plants, and factories even closing due to lack of power.

Geopolitical Tensions

The Russian invasion of Ukraine has led to energy price increases in many countries, plus food inflation in many others. Another area of potential tension and disruption seen in 2022 is the Taiwan strait. Any disruption of this shipping zone going forward will have a huge impact on the supply chain management of the world's computer chips.

Climate Change

Drought has been seen to reduce the water level in many major trade arteries across the world, from China to Germany. This impact of less water in major supply routes means that ships can only carry low-capacity loads to avoid running aground.

While other modes of transport can be used to avoid these issues, matching the cargo capacity of a single ship requires a fleet of replacement vehicles. This decrease in transportation supply increases costs considerably, whilst the options available can become less reliable.

Covid-19 Pandemic

While the main phase of the pandemic might be complete, the virus is still a potential problem in the supply chain sector. Some entry points like the ports of Los Angeles are still clearing backlogs from the peak of covid, even after relaxing restrictions by the Federal Government. While new variants and recurring infections lead to labor shortages, due to workers at every stage being in close contact.

Increased Interest Rates

The US Federal Reserve has committed to increasing interest rates long term, throughout 2023 to fight the inflation the United States is currently experiencing. In short, this means credit is discouraged and saving is encouraged, with borrowing money more expensive for businesses. Increasing interest rates can impact the funding available to businesses, while consumer demand also decreases.

Even if your online business is not directly impacted by increasing interest rates, your suppliers might be. This can lead to price increases to cover the higher interest fees they are experiencing, leading to inflation of key manufacturing and distribution services for your store.

How Easyship Can Help You Manage Supply Chain Disruptions

There are a wide range of factors that can lead to supply chain disruptions. Unfortunately, these can have an impact on your eCommerce store, from missed delivery dates to suppliers' prices increasing even while demand is decreasing. Take control of your supply chain with a shipping platform that can support you through every step and keeps your store competitive during disruptions.

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