Supply chain issues and COVID-19 continue to plague smaller businesses
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Supply chain issues are nothing new, yet the problem seems worse than ever. Perhaps compounded by other world and local economic factors, current business links suffer more than usual during supplier woes. And smaller businesses, as usual, bore the brunt of the damage, as megacorporations and larger entities use their vast resources for protection. But not even the most prominent players were invulnerable to COVID-19, which couldn’t have come at a worse time, as global socio-economic paradigms were beginning to buckle due to shortages.
You would be forgiven for thinking supply chain issues are a modern problem. But the phenomenon happens now and then, affecting raw materials like C16 graded construction timber and consumer goods. Some examples include the great tyre shortage of 2000 and Johnny Carson’s 1973 on-air faux pas that led to a toilet paper shortage in Venezuela. Of course, many supply issues aren’t so comical. But often, the problem is fleeting and resolves itself. Yet sometimes, there’s a long and destructive crisis, like a hurricane that doesn’t move.
The current crisis is a perfect example, but it began before COVID-19. The pandemic that saw most nations grind to a halt and millions deceased couldn’t have come at a worse time. The supply chain problem was already in freefall before 2020, and businesses worldwide were feeling the pinch. Mainly when it came to specialized materials such as those used to manufacture semiconductors, highlighted in the delay of video games consoles and vehicle manufacture. But COVID compounded issues for economies and local businesses.
Since 2020 and the disastrous effects of COVID-19, businesses worldwide have struggled like never before. Getting hold of materials, goods and reliable employees had never been more challenging. And today, many companies are still struggling. In addition, shipping costs have increased by over 50%, resulting in exorbitant fees because of container shortages. And now, energy prices are skyrocketing, with oil prices following suit thanks to Russia’s actions. All the while, Shell posts record profits of over $7 billion for the first three months of 2022 alone.
With the United Kingdom as an example, current supply issues occurred because of high demand for goods and services, with a simultaneous drop in materials and workers, alongside international and national transport delays. Of course, you could blame Brexit, but the UK’s withdrawal from the European Union has had surprisingly little effect on the nation’s economy. Supply chain issues are a global phenomenon, not localized to any single market. However, new restrictions meant a sharp decline in access to HGV drivers, disrupting Christmas 2021.
Pretty much every sector has taken a beating from COVID-related supply chain issues. While problems were on the horizon before the pandemic, the virus only added to the problem. Some of the worst COVID and supply chain declines during 2020 and 2021 by sector were as follows:
- Hotel and food fell by 52% during the pandemic.
- Recreational services such as gyms took a hit of 58%.
- Transportation saw a reduced usage of 22%.
- Manufacturing wasn’t hit hardest but fell by 18%.
- Admin and support services saw a sharp decrease by 24%.
With global and local lockdowns over in most countries worldwide, some economies are beginning to recover from COVID. Yet supply chain problems persist. They were perhaps made worse by the pandemic or an indicator that the issues are much more extensive.
At the most basic level, supply chain issues cause immediate and ongoing disruption to a business. In the worst case, they are forced to close. And while there is nothing one company alone can do to stop problems from occurring, you can insulate yourself with some forward-thinking. Disruption anticipation is key to stemming the worst. But it would help if you kept a close ear to the ground. If you cannot meet customer demand, perhaps consider diversifying your inventory with more available alternatives from local suppliers.
Innovative approaches are being applied right now in an attempt to curb the worst of global supply problems. A combination of academic and expert analysis and advancements in technology means you can meet demand by getting ahead of supply chain disruption before it becomes a significant problem for your company. Modern approaches include integrating retail and supply by gathering data via consumer spending and using IT systems to compare with commodities. This includes using RFID trackers across the board for real-time study.
To throw petrol on the fire, 40% of small businesses report they experience ongoing staff shortages because of COVID-19 and certain other economic factors. As a result, many of these consider themselves lucky to still be in business. However, many expect to be permanently shuttered by the end of 2022. In response to supply chain issues and staff shortages, smaller companies are stepping into online services. Presumably, the stick of the internet dangles the carrot of Amazon’s success. Other smaller businesses offer employees less work.
COVID-19 appears to be somewhat quelled, and most economies are picking up in this new year. Of course, there’s always the threat of another variant, but it’s not a guarantee. In the meantime, the supply chain problem is slowly but surely ironing itself out. However, most analysts warn that the issues could continue until 2023 or 2024. And then there’s the impending climate risk that shippers warn needs large-scale investment of over $100 billion annually to prevent another large-scale global supply chain crisis. But that’s another story for another day.
Supply chain problems aren’t a thing of the 21st century, but this is one of the worst in history because it came when a plague hit as well. The combined effects of two crises at once brought the world to a standstill. As a result, millions have perished, and countless businesses are lost forever. However, world economies are slowly recovering, and the worst might be over. 2022 won’t be an easy year, but there’s light at the end of the tunnel towards the next two years. Still, there’s the chance of another bump in the already fragile road of global economic wellness.