Top 10 Global Supply Chain Issues 2022
In the post pandemic world, even when the world is back to its business as usual we can still see the issues in the global supply chain. People are vaccinated in the majority of the countries and in some developed economies, a good proportion of the population has even received their booster shots.
1) Russia-Ukraine Conflict
Since the Russia-Ukraine Conflict, there has been a severe impact on the prices of most commodities that were being exported around the world like, fuel, oil and distillation products, Energy products, Iron and steel, Fertilisers, pearls and precious metals, etc,. On top of that, Europe has been importing natural gas and crude oil for decades, which means restriction to any of them could easily threaten the entire Europe. Russia also exports fertiliser globally, that means if the supplies get affected anywhere in the world, the crop yield will also get impacted.
2) Inflation
Inflation causes ripple effects along the entire supply chain. From the procurement of raw materials to the production of commodities, its transportation to the distributors, warehouses, retailers, or the final customer gets affected. Because of Inflation your cost of production increases, you start paying higher wages, your energy prices increase because of which the cost of transportation also increases.
And on the other end, people’s disposable income is still the same, which is reducing the demand for commodities. Because of shrinking demand for goods, businesses are also cutting on the supply of raw materials, because they know that they cannot charge the consumers for an increase in prices of raw materials.
3) Over Reliance on Major Suppliers
The Covid 19 pandemic brought to light the habit of businesses of maintaining strong relationships with single suppliers or just one major supplier. Because of which none of the businesses never had any backup supplier in case of an emergency.
4) Workforce and Labour
More than millions of workers across the globe have already lost their job post pandemic. Also, as the global supply chains are recovering, businesses are making more technological improvements and adapting to more innovations that can easily cater to the rising and complex consumer demands.
Workers across the globe are not fast enough to adapt to the technological skill sets demanded by these supply chain jobs.
5) Energy Shortages
Because of the Russia-Ukraine conflict, there has been a shortage in energy supplies by Russia in Europe. Europe’s economy is heavily dependent on exports. Because of restrictions in energy supplies, companies have either started cutting back their operations or going into temporary shutdowns. Food Supply Chains are getting impacted globally, especially in countries that were importing Fertilisers from Europe. And Europe has already slashed the majority of their Fertiliser Manufacturing Supply Chains.
6) Increase in Fuel Prices
As the cost of fuel prices increase, the cost of product movement across the supply chain keeps on increasing. Once the operational costs and production costs increase, it automatically affects both the business as well as consumers. In short, the cost of transportation of goods increases as the product moves from point A to point B, along the entire supply chain.
A lot of us now must have noticed this especially while ordering food online. The delivery charges have increased globally.
7) Extreme Weather Events
Drought has been noticed around the world, in Europe and China. As the water level drops, ships are in danger of running aground. In some cases, the freight can be transported via other modes of transport, but there is no replacement for sea freight, as you would need hundreds of cargo container trucks to replace a single container ship.
There are rivers in Europe that have started seeing a drop in water level. Yangtze river in China, is reported to have its water level below 45%.
8) Further Lockdowns in China
China is still battling with its Covid 19 infections, despite its Zero Covid Policy. Operations in the Shanghai port have slowed down. Foreign companies like Tesla and Apple are still wary of returning to their 100% working capacity. There are still some locations in China under strict lockdowns. And most foreign companies have started looking for production facilities alternatives to China.
9) Semiconductor Shortages
Today’s modern car requires a minimum of 1400 - 1500 chips and due to lack of these chips, there was a fall in the sales of cars globally. Companies like Sony, were unable to fulfil their latest generation console PS5 demand globally. The GPU makers like NVidia and AMD, were not able to manufacture graphic cards, because of which their merchants were seen selling their earlier stocks of GPUs with a markup of up to 300%.
10) Technology
As the global supply chain is getting more and more demanding, businesses have started to adapt to more technological innovations that can remove the bottlenecks and streamline the operations, so that the global supply chain issues can be tackled more efficiently and effectively. However, there is a lack of workforce that is equipped with the necessary skill sets. Businesses must start taking into account the Generation Z, as they will be the next workforce in the industry taking charge.
So, there were the Top 10 Global Supply Chain Issues 2022 that were seen globally.
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