New Factors Affecting Supply Chains

Molly Hass Uncategorized

The Covid pandemic revealed massive supply chain shortages, in all industries, including the tech industry with chip shortages used by automakers.  Now, other global forces are affecting supply chains.  Russia’s invasion of Ukraine has set off a new series of bottlenecks.  Russia and Ukraine supply 29% of worldwide wheat and corn.  Ukraine and Russia don’t produce chips used by automakers but Ukraine is the leading source of neon used in the chip-making process.


Supply chain factors are driving prices higher around the world but the war in Ukraine is making matters worse.  The demand for goods like cars, oil, and computer chips have outpaced supplies.  It is difficult to know when these disruptions will end and the longer that the war continues, the situation is likely to get worse.


Widespread disruption is clogging the system.  Though manufacturers, logistics, transportation, and retail can often adapt to long term changes, short term changes are difficult to adapt to.  Operations are re-thinking how to structure their supply chains to mitigate these kinds of unknown risk factors that are sure to happen again in the future, like Covid or the war in Ukraine.


The Biden administration has announced many measures which the government can take to strengthen freight transportation and infrastructure.  Again, these measures will help in mitigating long term challenges but will not offer much relief to short term challenges.


Currently, there are supply-chain disruptions ranging from factory and port closures in China to interrupted supply of basic materials from Ukraine, as well as congested port operations and labor contract negotiations in the United States. These disruptions are often due to geopolitical issues.  Ultimately these disruptions will lead to inflation.


New risk factors are on the horizon. China’s “zero Covid” policy is disrupting manufacturing and port operations. Specifically, lockdowns at some factories and at major port cities such as Shenzhen, Tianjin and Ningbo have disrupted the flows of goods from China to the U.S. Because the Omicron variant is highly transmissible, this strict policy will continue to cause disruptions, especially if the BA.2 subtype of the Omicron variant becomes a problem. China’s Zero-Covid policy is also disrupting manufacturing and port operations.  


It is prudent for society at large, including governments, manufacturers, logistics, transportation providers, and all large players to come together to strategize how to best prevent the types of bottle-necks and shortages that have come to be expected in many countries now, often affecting developing countries more than developed ones.


Attend TiEcon 2022 to hear some fascinating discussions by various experts who have understanding of supply chains.  You are sure to be fascinated and enlightened by the topics that will be discussed.