Supply Chain Forecast for the Rest of Summer

Trying to get through a global pandemic can be challenging. The global supply chain’s unpredictability has consumers and business owners what is available and affordable. Predicting specific outcomes can be a make or break for survival. Unfortunately, we cannot predict the future perfectly, but we have clues to help forecast more accurately.

Understanding the Pandemic

Before the pandemic started, chip manufacturers began to struggle. Microchips, used in everyday items like our smartphones, laptops, and cars, saw a slowdown in production. Then the pandemic hit, and people were stuck at home.

Being home came with many new challenges. People were bored but also needed to work remotely. This increased demand for microchip-dependent items like laptops and computers, but it did not stop there. Consumers also wanted things like desks and equipment for exercising at home. This also increased demand for goods.

With demand increasing but the pandemic putting the world at a halt, companies could not get the microchips or goods needed to produce their items. Consumers were panicked and overbought. Demand rose even higher, and businesses could not meet production and distribution. A bicycle can have the frame made in France but need the tires from Germany, so even if one country was doing better, production of goods could not be met.

As you can see, this was a recipe for disaster.

Moving Forward

Due to everything that has happened in the last two years, companies will look to create more opportunities for operations at a local level instead of having to rely on outsourcing with international partners for the completion of production. For example, Ford, now focusing on transitioning to electric vehicles, is investing in creating new automotive production jobs in Michigan.

 Allocation

Allocation is a term being used in every industry now. If you own a business and usually buy 50 units of one item, a supplier might only allocate 40 units. This could be an issue for your business. What if it is an item that does well? Now you are getting less. What if you want to get 100 units to stockpile, just in case? You may turn to another supplier, which could mean settling for inferior quality items. This can be a considerable risk to customer satisfaction.

Inflation

Another hot topic is inflation. Prices and debts are expected to increase to accommodate the rising inflation rates.

The price increase can be seen in gas stations or even smaller items like bread. A loaf of bread that used to cost $3 is now $5 to help pay for the increased production prices, transportation, and labor.

Interest rates are gradually increasing as well. For example, if you are taking out a loan, the interest rate can be a minimum of 5% as opposed to the usual 3%. According to Bloomberg Economics, the average American family will need to spend an extra $5,200 annually to maintain the same living level as the previous year.

Summer’s (Almost) Over

Summer will not last forever, and the problems contributing to global supply issues will eventually end. The next few months will not be easy, but they will not be impossible to overcome.