Commercial Integrator February 2022 - 10

AV BRAINS & BRAWN
The Supply Chain Explained and Demystified, Part 2
Exploring the many facets of supply-chain snarls and suggesting proactive steps for AV integrators.
By Alan C. Brawn
Editor's Note: This is Part 2 of the piece
that began in our January 2022 edition.
SUPPLY-CHAIN ISSUE ARE NOT NEW,
but COVID-19 can be thought of as the
catalyst for the global economic situation
we find ourselves in today. Also consider
that all parts of the world have not been
affected equally by the pandemic; as such,
we're all recovering at vastly different rates.
Beginning upstream at the source of things
like raw materials, and then moving to lowcost
manufacturing and so on, COVID-19
has interrupted many key elements of
supply. The first blow came when Chinese
plants that build parts or assemble goods
for global manufacturers were shut down
by COVID-19 outbreaks. It's not easy to restart
factories after they've been shut down
to stem surges in cases. Raw materials back
up, and it can take weeks or months to
restart production.
Similar disruptions soon spread across
the globe, affecting both manufacturers
and the logistics companies that ship, store
and deliver their goods. One analyst points
out that " the supply chain is a system.
When you create shocks from the supply to
the demand side and that continues to happen,
the system isn't getting enough time
to reset and recalibrate. " This is the domino
effect that is still in play.
Where the U.S. is concerned, at the time
of this writing, we've been recovering economically
much more rapidly than the rest
of the world has. The federal government
invested a lot of money into the economy
both for businesses and individuals. This
has kept consumer and business spending
at relatively high levels. That we're currently
in what most would consider a rapid recovery
has resulted in high demand. The
disconnect or the imbalance lies in demand
as compared to supply.
Analysts say that the lingering effects of
COVID-19 responses essentially reduced
the production of goods and services. The
supply-chain shortages now are the result
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The insufficient number of warehouse
workers has exacerbated related supply-chain
problems. There is now a shortage
of dock workers and truck drivers.
of struggles to return to pre-pandemic production
levels. " The result of that imbalance
between supply and demand eliminated all
the inventory and eliminated all the grease
that allows the wheels of commerce to
work smoothly, " Steve Ricchiuto, chief U.S.
economist at Mizuho Securities, observes.
More Goods to be Delivered
As the pandemic (we hope) approaches
its end, we are seeing more goods
being produced, but they now must be
delivered. Many companies forgo having
U.S. factories altogether, still relying on a
far-flung supply chain that requires some
combination of planes, ships, trucks and
warehouses to pull together its products,
deliver them and store the inventory. This
reveals the next set of issues, which involve
labor, transportation and logistics. There's
reduced capacity because of the problems
all along the supply chain. Yes, demand
is high, but there is a finite (and, in some
cases, a diminishing) number of resources
available to support the supply chain.
Economists tell us that there are not enough
dock workers, truck drivers and warehouse
workers to meet the demand.
Ports were barely keeping up with the
growth in freight before the pandemic, and
they had no ability to absorb the disruption,
Ayman Omar, an associate professor
at American University's Kogod School of
Business, observes. The pandemic has exacerbated
the situation, which now includes a
shortage of trucks to haul cargo containers
Commercial Integrator FEBRUARY 2022
to their destinations. As an example, there
were 70 ships in a holding pattern near the
ports of Los Angeles and Long Beach, Calif.
on an average day in November. They're
simply unable to handle the growing number
of ships. It is estimated that vessels were
spending about as much time waiting to
anchor and unload - about two weeks - as
it would take a ship to cross the Pacific!
Omar explains that the lack of transparency
and information sharing compounds
the problem. It makes it impossible for
port-reliant manufacturers and importers to
see problems developing in advance and
route around them. Containers are piling
up on docks, and more keep coming -
each new ship brings in 10,000 to 21,000
containers.
The shortages and the heavy demand for
shipping have caused freight costs to skyrocket.
The cost to move a container from
China to the U.S. west coast is four times
what it was a year ago - and more than 10
times what it was before the pandemic.
Once product is off ships, it takes trucks
and rail to move the cargo to its destination.
The American Trucking Association (ATA)
has estimated that it would be short some
80,000 drivers, but those shortages could
worsen due to retirements and new truck
drivers needing training. " There's a shortage
of drivers, and it is one of several issues contributing
to problems in the overall supply
chain, " Sean McNally, an ATA spokesperson,
explains. " However, it is a reflection of the
strong demand for goods - and everything
consumers buy is delivered in a truck. "
Once the trucks are loaded, they need to
go to warehouses across the country. Then,
from warehouses, they go to their destination.
The warehouse story is no better,
unfortunately. The Labor Department recently
reported that the warehouse industry
had a record 490,000 job openings. With
the unemployment rate hovering around
4.25%, there is a competition for workers
to populate the supply chain. The demand
for their services now exceeds the supply.
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Commercial Integrator February 2022

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