Supply chain issues threaten to increase the cost of Christmas

 

Christmas deliveries are under threat from supply chain problems. Here Dr Jonathan Owens, logistics expert from the University of Salford Business School comments on the situation, saying we could see higher prices and lack of availability this festive season.

Empty shelves, delayed or cancelled deliveries have become a familiar sight for many, as companies struggle to meet demands on-line and traditional supply channels, with decreased capacity.

Christmas supply routes are now running, and many companies are finding it challenging to book their place on the ships, as currently the main supply route for our manufactured products is China.

Ningbo port has been partially closed to shipping traffic due to a Covid outbreak.  This bottleneck is going to cause further disruption to the global supply of shipping containers, which have never recovered from the first wave and are still imbalanced, which has created a shortage and driven up container prices.

Shipping has been extremely tough during the pandemic. However, what perhaps makes Ningbo a significant announcement is it is the world’s third busiest cargo port and at a time when Christmas supply chains are now being loaded.  Subsequently, what we could be seeing downstream in our supply chains is delays and eventually bottlenecks appearing at our ports and distribution hubs at the busiest time of the year. This year could see a more expensive Christmas shopping experience, product shortage especially and not as much choice.

For supply chains to function well, they need good infrastructure throughout, be digitally and IT connected, but crucially they need people.  Companies build into their planning about a 3% loss of personnel, before it starts to affect their operations.

Often, they can cope with small fluctuations, but as we have seen with the HGV distribution industry this has been the perfect storm.  They have lost a significant workforce who returned to the EU post Brexit.

To counter this the sector has been building up capacity through training new drivers, however this takes time and once these new drivers were trained the Covid restrictions created a backlog in getting them licensed and on the road.  We have seen choice and variety of product being reduced, but often the price has risen, and we will probably see more rises on the horizon.

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