Supply chain disruptions are in the news lately, with companies describing historic delays in bringing their products to market. But what’s behind that spike besides higher demand?
In this video from “The 5” on Motley Fool Live, recorded on Oct. 4, Fool.com contributors Brian Withers, Rachel Warren and Demitri Kalogeropoulos share their perspective on these issues.
Brian Withers: I forwarded this list to these crew and I want to see one of this list that you are particularly interested in. Since it’s your first time, I’m just going to throw you in the deep end, Rachel, and we’ll put on first [laughs]
Rachel Warren: I’m excited. [laughs] This is a really interesting list. I in particular going off a point you mentioned about supply chain disruptions. I’m really interested to see what’s going to be happening in terms of the US’s important numbers. We’re like the top importer of products in the world. This is obviously an area that’s been hugely affected.
Global supply chain disruptions we’ve been seeing on an unprecedented scale since the pandemic began. I think this is a trend that’s probably not going away anytime soon. I think the hope is that fully over time, it dies down. I think that’s what people are hoping to see in some of these numbers that are coming out this month.
I’m sure I’m not alone in this, but one of the things that has really been on my mind is what exactly is driving these global supply chain disruptions. We hear people talking about it a lot. But maybe for your average layman, like myself, I was like, well, what’s exactly driving this? Just so that I understand, like when I go to the store and my coffee creamer [laughs] costs more.
Why is that? [laughs] I need to know.
Obviously there’s this basic thought of supply chains globally were disrupted due to the pandemic, demand stalled. Now it’s rising exponentially again, and the supply chain is struggling to meet that demand. There’s so much data out there can be difficult to understand exactly what is driving these disruptions. Now you’ve got concerns about the duration of global supply supply chain disruptions extending to the holiday period. There’s talks that retailers are going to be having a toy shortages with demand so high and all these different lags in the supply chain.
I did a little research and I found that it’s really interesting report by a supply chain risk monitoring company called, I’m going to say the name on but it’s Resilinc, I think it’s how you say it. It was a really interesting report and I was scrolling through and I found some interesting points that can help explain why we’re seeing what we’re seeing and might share a little clarity when these import numbers come out. According to this report, supply chain disruptions due to supply shortages were up 638 percent in the first half of this year. This was led by shortages of items like plastic and semiconductors.
The U.S. is one of the top importers of semiconductors in the world. The top 5 disrupt versus the reported names, were factory fires, number 1, mergers and acquisitions, number 2, number 3, business sales, number 4, factory disruptions, and number 5, leadership transition. I don’t know about you, but some of those really surprised me, particularly in mergers and acquisitions.
But interestingly that factory fires was the number 1 cause of supply chain disruptions in the first half of this year. Factory fires during the first half of this year were up 150 percent compared to the same period last year. You may remember, for example, that big fire in Japan that impacted the global computer chip supply chain.
The report also noted that human health disruptions, so for example, corona virus, were among the top 20 of events that we’re driving these disruptions. The ongoing pandemic has had a huge impact on imports. You’re hearing stories of cargo ships that are backlogs in these major ports like LA, you’re seeing things like worker shortages, ongoing COVID health protocols that are slowing the process down, and workers testing positive resulting in disruptions.
You hear about ships that are getting turned around because someone on board tested positive for COVID and they have to turn around. There was a story in August where the world’s third busiest trading port in that major city in China shut down for two weeks because of one worker tested positive for COVID. Of course, that affected huge slots of the world.
They think they have all these factors at play and the fact that US is the leading import country in the world, it really makes sense of what’s happening on the ground here at the docks with labor shortages and the COVID situation, as well as what’s happening abroad in these major ports, cities is very much impacting what consumers you’re seeing here at home that might help to shed a little light on what we’re seeing, even if it’s not something we enjoy when we go to buy daily products.
Demitri Kalogeropoulos: Yeah, I like that.
Warren: What do you guys think?
Kalogeropoulos: That was interesting. I wouldn’t have thought, the factory fires would have been so prominent in that too, but that’s interesting. Also the bottleneck aspect of this whole thing, because like you said, sometimes we could get the container ships to the port on time.
But then if you don’t have the truckers to carry it, or if you don’t have the equipment there to unload it, it doesn’t really matter. It’s interesting how they call it a supply chain for a reason and we’re seeing how [laughs] one of those links can really just mess the whole thing up.