Navigating the 2021–2023 Global Supply Chain Crisis

The 2021-2023 global supply chain crisis was a perfect storm of events that left many businesses scrambling to keep up. The crisis was triggered by the COVID-19 pandemic, which led to widespread lockdowns and border closures.

The pandemic caused a massive disruption in global trade, with the World Trade Organization estimating that international trade fell by 9.2% in 2020. This decline in trade had a ripple effect throughout the supply chain.

Manufacturers struggled to keep up with demand, leading to stockouts and shortages of essential goods. The crisis was further exacerbated by a shortage of truck drivers, which caused a backlog of containers at ports.

As a result, many companies were forced to adapt quickly to changing circumstances, implementing new logistics strategies and finding alternative suppliers.

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The global supply chain crisis has been a complex issue with far-reaching effects. The pandemic has slowed down operations at all levels, causing a 20% increase in the time a container spends in the system for a typical door-to-door trade transaction.

Growing e-commerce and economic stimulus packages have put additional pressure on carriers, ports, and intermodal transport providers. This has led to congestion in ports, ships, trailers, and containers getting stuck, and the need for more transport capacity and equipment.

The supply chain crisis was caused by backlogs across major supply chain hubs. This will almost certainly continue into 2022, negatively affecting trade and reshaping trade flows across the world.

Regional trade within Africa and the Asia-Pacific area is expected to increase, but also divert trade away from other routes. This will have significant repercussions for global supply chains.

The inability to meet customer demand is a major challenge for businesses. According to a recent study, organizations' biggest supply chain challenge is securing raw materials from suppliers.

Lack of diversification in the supply chain network and suppliers' inability to keep up with technological advancements are partially to blame for this issue. This failure in supply chain distribution can cause the loss of customers, diminish revenue, and ultimately affect the future success of a company.

Empty shelves in stores around the globe are a visible sign of this failure. It's crucial to take steps to strengthen supply chain networks and processes to improve efficiencies and meet consumer demands.

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The global supply chain crisis has had far-reaching impacts on various industries. Staple products like wheat, corn, and soybeans have become capital intensive, while high-value produce like fruit and vegetables relies on labor-intensive work.

The food industry has been severely affected, with prices of key foodstuffs increasing significantly over the past two years. Labour shortages due to the pandemic have caused disruptions in sowing and harvesting on farms, leading to logistical challenges and dumping of products like milk.

Food processing plants, which are labor intensive, have been adversely affected by lockdowns and restrictions on workers due to illness. This has caused a ripple effect across the food supply chain, with producers forced to cull their farm animals as they cannot sell their livestock to processing plants.

The construction industry has also been impacted, with material and labor costs rising rapidly. In Australia, costs increased by around 15% in 2021, with essential construction materials like reinforcing steel and structural timber rising by more than 40%.

To manage their risks, builders can take steps like building extra time into contracts, requiring contractors to allow for a buffer for key supply items, and sourcing items locally.

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The food industry is feeling the pinch of supply chain disruptions, with prices of staple products like wheat and corn increasing significantly over the past two years. This is due in part to labour shortages caused by the pandemic, which have affected the supply chain in various ways.

Labour-intensive work such as sowing and harvesting on farms has been particularly impacted, with many temporary or seasonal workers being absent due to illness or migration restrictions. For example, the 'Pick for Britain' campaign in the UK aimed to source local workers to harvest crops.

Food processing plants, which are also labour-intensive, have been adversely affected by lockdowns and restrictions on workers due to illness. Meat processing plants, in particular, were considered high-risk sites during the early stages of the pandemic.

Supply chain disruptions have also led to logistical challenges, making it difficult for farmers to get their product to market. In the US, Dairy Farmers of America cooperative dumped gallons of milk every day due to supply chain disruptions and the closure of restaurants.

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Here are some key statistics on the impact of supply chain disruptions on the food industry:

The construction industry is also feeling the effects of supply chain disruptions, with material and labour costs rising rapidly. In Australia, costs increased by around 15 per cent in 2021, with essential construction materials like reinforcing steel and structural timber rising by more than 40 per cent.

Builders are now being forced to ask for 'rise and fall' provisions to be included in contracts and seeking extensions for completing jobs due to materials shortages. Some contractors are even requiring deposits for offshore supplies earlier than usual to mitigate the risks.

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The fuel industry is facing significant challenges due to the ongoing conflict in Europe and the pandemic-induced surge in demand for transport fuels. This has led to price increases and disruption to supply chains.

Fuel companies should consider diversifying their supply chains by sourcing fuel from a wider number of countries and storing it in diverse locations. For example, AMPOL has established partnerships with US producers, improving its sourcing capability and supply chain diversification.

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In order to stay ahead of market dynamics, fuel companies should engage with market participants to understand the impacts of global disruption on local suppliers. This can inform key decision-making as supply chains rebalance in response to these disruptions.

Fuel companies can benefit from coordinating activities on a national scale in response to a supply chain crisis, outweighing short-term competition concerns. By working together, they can ensure security of supply.

Here are some key strategies for fuel companies to consider:

Supply chain disruptions can lead to shortages of key goods, price inflation, factory closures, and unloaded shipping containers, negatively affecting a nation's economic wellbeing.

The Suez Canal blockage in March 2021 temporarily stopped 369 ships from passing through the canal and delayed an estimated US$9.6 billion worth of trade each day.

Supply chains were focused on getting goods quickly and cheaply to customers before the pandemic, leading to outsourcing and reducing spare stock at plants, making them rigid and vulnerable to disruptions.

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This complexity means the accumulated effect of disruptions can take a long time to be resolved, with a shock of that proportion impacting supply chains for six to nine months ahead.

The Global Supply Chain Pressure Index reached an all-time high during 2021, using data on sea shipping costs, delivery times, backlogs, and purchased stocks.

Consumer demand for this year's holiday peak season is still unclear, and many manufacturers have opted to reallocate capital expenditures to network development projects, such as reshoring.

Companies should diversify their sources of supply, manufacturing, and distribution to mitigate disruptions caused by unforeseen events.

Travel restrictions, like those imposed on China, can cause a ripple effect throughout the world, impacting supply chains in nearly every industry.

Cargo ships were unable to dock to offload goods, and trucks were stopped at the borders with full loads, disrupting supply chain processes.

Limited inventory is a problem when supply chain disruptions occur, as businesses rely on complex supply chain networks to deliver the supplies they need, when they need them.

Businesses that relied heavily on trade with national and international distributors found themselves stuck when shutdowns and travel restrictions hit, forcing them to transfer to local and regional distributors.

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The global supply chain crisis of 2021-2023 was a complex and multifaceted issue, with disruptions affecting industries worldwide.

FTI Consulting's Economic & Financial Consulting team has deep experience providing advice on issues like demand forecasting, cost forecasting, dispute resolution, business forecasting, and asset valuation, which can help businesses navigate the challenges and opportunities presented by supply chain disruptions.

Companies like Oracle Netsuite recommend using just-in-time inventory management to reduce waste and cost by aligning raw-material orders with production schedules.

The Suez Canal blockage in 2021 highlighted the importance of supply chain resilience, with estimated losses of over $9 billion.

Here are some key areas where businesses can focus to improve their supply chain resilience:

To develop a winning strategy, consider the importance of setting clear goals. A well-defined goal provides direction and focus, helping to prioritize efforts and allocate resources effectively.

Breaking down complex tasks into smaller, manageable chunks is essential for achieving success. This approach, known as task segmentation, can help to reduce overwhelm and increase productivity.

Identifying key performance indicators (KPIs) is crucial for measuring progress and making informed decisions. By tracking relevant metrics, businesses can adjust their strategies and make data-driven decisions.

A strong team is essential for achieving success, and building a diverse and inclusive team can provide a competitive edge. This can be achieved by actively seeking out diverse perspectives and experiences.

Embracing a growth mindset and being open to learning and improvement is vital for staying ahead of the curve. By being receptive to new ideas and perspectives, individuals and businesses can stay adaptable and responsive to changing circumstances.

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FTI Consulting can help businesses navigate the challenges and opportunities presented by disruptions in global supply chains and rising materials and labor costs.

Just-in-time inventory management can reduce waste and cost by aligning raw-material orders with production schedules. This approach is particularly effective in reducing waste and cost, as seen in Oracle Netsuite's guide to just-in-time inventory management.

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Companies can also benefit from FTI Consulting's expertise in demand forecasting, cost forecasting, dispute resolution, business forecasting, and asset valuation. These services can help businesses make informed decisions and mitigate risks.

Global supply chain disruptions have significant impacts on businesses, as seen in the Suez Canal blockage, which resulted in substantial economic losses. According to the UNCTAD Review of Maritime Transport 2021, the blockage had a ripple effect on global trade and commerce.

FTI Consulting's Economic & Financial Consulting team has deep experience providing advice on these issues and can help businesses develop strategies to mitigate the effects of supply chain disruptions.

Here are some key areas where FTI Consulting can help:

By leveraging FTI Consulting's expertise, businesses can develop more resilient and adaptive supply chains, better equipped to handle disruptions and changing market conditions.

The global supply chain crisis has put a strain on businesses and consumers alike. Record-breaking global freight rates have increased the cost of shipping and importing, causing higher consumer prices.

Port congestion has become a significant issue, with ships waiting to unload, ports waiting for trucks to move containers, and trucks waiting for ships to dispose of empty containers. This creates a ripple effect throughout the supply chain, leading to backups and delays.

Higher consumer prices can have a particularly devastating impact on small island developing states and the least developed countries, whose economies rely heavily on international trade.

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The construction industry has been hit hard by the global supply chain crisis. Material and labour costs are rising rapidly, with costs increasing by around 15 per cent in Australia in 2021, more than the price rises seen over the previous seven years.

Essential construction materials like reinforcing steel and structural timber rose by more than 40 per cent over 2021. This has led to a situation where constrained builders are likely to fall into insolvency, as seen in recent high-profile collapses like Probuild and Condev.

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To manage these risks, builders can take some practical steps. Building extra time into contracts to allow for supply chain delays can help mitigate the impact of shortages.

Requiring contractors to price in the risk of delays and then fixing the cost subsequently can also help manage risks. This approach can provide a buffer for key supply items and help ensure that projects stay on track.

Builders can also help themselves by sourcing items locally, rather than relying on offshore supplies. This can reduce the risk of delays and ensure that materials are available when needed.

Here are some strategies builders can use to manage their risks:

The 2021-2023 global supply chain crisis has far-reaching consequences that affect various industries and individuals. Everyone from producers and distributors to retailers and consumers is impacted by the current supply chain crisis.

Manufacturing is one of the hardest-hit industries, with delays in just one required raw material halting production altogether. This is a stark reality for many manufacturers who are facing multiple supply chain shortages impacting several stages of the production process simultaneously.

The auto industry is expected to lose over $200 billion in global revenue due to the semiconductor shortage alone. This staggering figure highlights the severity of the crisis.

The construction industry is also feeling the pinch, with lumber prices having more than doubled since the pandemic. This has a ripple effect on everything from new construction to home renovations.

The shipping industry is struggling to keep up, with suppliers' delivery times reaching an all-time high in the United States and European Union. This is a significant concern for businesses that rely on timely deliveries.

The impact of the supply chain crisis is also being felt by consumers, with the Consumer Price Index rising by 3.6% in the EU and by 6.2% in the U.S. in September 2021.