Empty shelves, crammed ports of delivery containers, and rising prices: the crisis in supply chains is hitting the global economy hard. Are we about to relive a toilet paper shortage? Should we be worried about our holiday gifts? We explain the situation to you in five points.
What is happening?
Shortages in the United States, which affect various sectors and products such as drugs, car parts and toilet paper are at their highest in 20 years, reports the American media Bloomberg. The situation is similar in the euro zone and in the United Kingdom.
The owner of the Ikea brand even warned us recently that the prices of his products will go up due to the rise in the price of raw materials, but also because, he says, the costs related to transport have caused a significant drop. its annual profits.
So get ready to pay more for your next library …
In Quebec, even if we do not see empty shelves, the rise in prices, especially in the food sector, has been felt for a long time now. Although there are many causes, the pressure that has been exerted on global supply chains over the past few months has had a lot to do with it.
But before we go any further, what exactly is a supply chain?
A supply chain is all the stages through which a product must go to reach us.
AFP
It is, in a way, the route taken by the product, whether it is a good or a food, from the place where it was manufactured or cultivated to its final destination. It includes its transformation and transportation.
Depending on the product, its final destination varies: it could be a business, a store, or even your home.
1 – The impact of the pandemic
These supply chains have been severely shaken by the pandemic, explains André Tchokogue, associate professor and director of the operations and logistics management department at HEC Montreal.
Then, when the world economy recovered, after being put on hiatus in 2020, we found ourselves facing a monster traffic jam.
“During the pandemic, large producers, like China, were called upon to send essential goods, such as protective equipment, for example, all over the world. However, the handling of empty containers has been very poor, so there is now a shortage of containers to meet demand, ”he explains.
2 – Shortage of containers
What you need to know is that a lot of the products we consume arrive in containers, via the Port of Montreal, in particular. Annually, loads in Quebec ports represent approximately 110 million tonnes of goods and 75% of this traffic comes from international sources.
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Normally there are defined routes and well-oiled logistics when it comes to global shipping. Ports usually have no problem putting empty containers back on ships and sending them back elsewhere, where they will be refilled and then re-routed around the world.
However, in the urgency of the pandemic, China sent its containers to regions that were not equipped to accommodate so many, such as West Africa and South Asia. Results: A large number of empty containers are still stuck in ports around the world. These delays increase the cost of transport, says Tchokogue.
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“As soon as the needs cannot be met, we observe a phenomenon of scarcity which gives rise to auctions, which increases prices. If you are a producer and you absolutely want your product to get to Montreal quickly, then you have to pay top dollar. And the price paid by producers is reflected in the consumers’ wallets, ”he explains.
3 – Labor issues
However, the difficulty in moving goods can not alone explain the problems of shortages that are observed all over the world.
“To all this is also added a manpower problem, since several people left their posts during the pandemic and not all of them have returned to work. Even at the Port of Montreal, they have had labor problems recently unloading boats, ”he says.
Photo Joël Lemay
This same problem can be seen elsewhere in the world.
In Vietnam, for example, factories that make Nike shoes have had to cut back on production because workers have returned to their hometowns. China, meanwhile, has recently been hit by an upsurge in COVID-19 cases in some areas. Large factories had to be shut down to prevent the virus from spreading.
4 – Bottling
At the same time, in North America and Europe, online commerce continued the growth that began with the pandemic. To meet demand and avoid shortages as the holidays approach, companies have had more products delivered.
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Production rates have thus accelerated to meet demand, which has congested the transport system and the ports where containers arrive. In the United States and China, thousands of containers full of goods are waiting to be unloaded.
5 – What are the risks for Quebec?
André Tchokogue strongly doubts that we will be affected by the current shortages in the United States. “In Quebec, there are big solid players in the mass distribution industry and I doubt that they will be impacted in the same way as in the United States.”
Quebec has a local production capacity which should make it possible to avoid finding itself in the same situation as certain countries where the capacity is less, he continues.
“Quebec has excellent local production capacity for a variety of goods. If global economic conditions constitute a barrier to supply, the local market can support demand temporarily, ”he concludes.