One of life’s little, maybe even big frustrations is going to the store for something you really need only to be told, ‘It’s out of stock.’ Worse, the out-of-stock item you need may not be back on the shelves or even coming in for weeks or months. But in a post-COVID world, outages, shortages and open-ended delays are a reality.
A visible reminder of these shortages, or ‘supply chain’ issues, is the new car market. Passing a new car dealer—especially this time of year when new models begin arriving—you now see a lot of open space and fewer and fewer new models.
“Pre-COVID,” says Lakewood’s Stevinson Toyota sales manager Tony Salazar, “we had over 800 cars on the lot. If you wanted a certain car,” he said, “you could buy it.” It’s not that easy now. “If you want a new car, we put you on a list.” And you wait. Some dealerships, he said, also ask for deposits.
While we no longer live in the darkness COVID created, neither are we completely out of it. People are still contracting the virus, and some are still dying from it. But if there’s one thing COVID did, it reminded us about the interconnected world we live in. And the supply chain that keeps us dependent on one another.
The supply chain is the connection between production and distribution of a commodity. One country produces something, someone else buys it. COVID, along with globalization, upset this dynamic. Compounding the issue were global conflicts, weather, labor disruptions and a whole host of other things.
Then there was the collapse of Baltimore’s Francis Scott Key Bridge. On March 26th, in a freak accident, a cargo ship hit the bridge causing it to collapse. The shutdown of the country’s ninth busiest port exacerbated a supply chain already under huge pressure. The port receives the country’s biggest supplies of sugar and gypsum, two commodities that fuel major industries and create thousands of jobs. Incoming and outgoing ship traffic had to be rerouted. A reroute also adds cost to the shipments.
But it wasn’t just big-ticket items that fell victim to the supply chain disruption. While commerce wasn’t entirely at a standstill, things slowed down, and shortages mounted.
Even the little things often taken for granted grew scarce. Of course, there was the case of the toilet paper shortage, also one of the first hoarding targets. But countless other things, too; beer, wine, spirits, juice, glass all temporarily vanished. And when supplies went down, prices rose. The number one rule of economics, supply and demand, took over.
China, the country with the first and most serious COVID outbreak and also a country that exports thousands, perhaps millions of products to the U.S. suddenly cut back producing and exporting. Chinese lockdowns created labor shortages. With no workers to build, exports took a dive. The splash back hit the world and especially the world’s biggest economy.
“Our economy is production, consumption, labor and capital,” said University of Denver Daniels College of Business professor Jack Buffington, an expert on supply chains. “In the 21st century,” he said, “markets are opening up.” In addition to China and India, two major traders to the world, but countries like Vietnam, the Philippines, Thailand and others are also in the game at serious levels. Each produces commodities the U.S. relies on. Of course, Mexico and Canada, our nearest neighbors, are also in the field.
During the pandemic, Mexico could still export tequila—the country had declared its production essential—but glass makers were ordered closed. Canada was forced to dig into its strategic reserves to meet its national sales quota of maple syrup. Even champagne or sparkling wine took a hit, with glass, cork and labor shortages.
Every product that now relies on computer chips took a dive. Exports from China, South Korea and Taiwan, three counties that lead the world in their manufacture and export of chips, cut back dramatically. The pipeline went from torrent to trickle.
Bicycles, motorcycles, lumber, and so many things we might take for granted suddenly became rare as a result of COVID and the recovery is still underway and incomplete.
But COVID did expose an uncomfortable truth. The country and the world are not prepared for what experts call ‘low probability, high impact events.’
As testament to this, when COVID hit, the U.S. did not even have a stockpile of things that became part of everyday life. The country, in its darkest hour and doing battle with an invisible enemy capable of taking out huge swaths of human life didn’t have enough ventilators, personal protective equipment, masks, sanitizerand vaccine. One especially embarrassingly short supply commodity was baby formula. In San Antonio, Texas, the shortage was so acute that supplies were essentially reduced by half.
But while COVID was a worldwide scourge, it did expose one extremely critical break in the dam; that society’s overall preparedness for low-probability but high-impact events, especially global ones, requires a high priority fix.
We will return to normalcy. But exactly when is, in many cases, open ended. “It’s a new reality,” said Toyota’s Salazar. “The chip shortage, glass shortage, vendors, it all has a ripple effect,” he said, before adding that it was also wars that also shut some things down. “But that’s the way it is now.”
Buffington added another element that portends a future challenge as important as keeping the supply chain open. “It’s not often talked about,” he said. “The populations of most countries are going down.” That means the future may have fewer workers. “Younger people are more productive than older ones.” COVID, he said, was a triggering point. “What we’re seeing is way past COVID. There are a bunch of new triggers.”
