Supply ChainHow to Fix Global Supply Chains for Good
Truck-driver shortages, “lean” inventories, and an overreliance on China plagued global supply chains long before the pandemic. Permanently addressing these and other issues will help the United States and rest of the world better cope with the next shock.
The difficulties plaguing global supply chains have captured the world’s attention in recent weeks, illustrated in the media by pictures of empty store shelves and cargo ships waiting at sea. The Joe Biden administration has taken some steps to tackle the immediate challenge, opening the Port of Los Angeles to 24/7 operations and enlisting the help of private companies to move goods, for example. However, these supply chain issues will likely persist for the next six months to a year, possibly even longer.
Some of these challenges reflect the unbalanced nature of consumer demand—heavily skewed toward goods and away from services—a notable feature of the postpandemic reopening. Another chief factor is the dramatic decline in workforce participation. Federal Reserve Chairman Jerome Powell suggested in a recent press conference that this will right itself eventually “with further progress on containing the virus” [PDF], as workers will be less fearful of returning to work. There are some signs that the supply chain bottlenecks are easing up a bit.
However, even if the current crisis is resolved over the next year or so, there are systemic issues that should be addressed so that global supply chains will be more resilient to future shocks. Some of these problems are unique to the United States, while others are present around the world.
Transportation Troubles
Labor shortages in the transportation and warehousing sectors have been among the most significant contributors to the strains in supply chains in the United States and other countries, as cargo unloaded at ports is unable to reach their destinations on time. Though the pandemic has led to labor shortages in many sectors, truck-driver shortages were an issue even before the pandemic. However, in the United States, the problem is not a lack of licensed truck drivers.
