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To say that conditions are chaotic in the US supply chains is quite an understatement. Americans are seeing shelves getting increasingly emptier at stores all over the country. Shortages and soaring prices have become the new normal. And a series of new issues keep aggravating the supply chain crisis ahead of the winter.
The way the U.S. government has mishandled the supply chain crisis is truly catastrophic. They have managed to create even more disruptions in every step of the way. With the memory of depleted supplies during last year’s panic buying frenzy, consumers got spooked by the warnings of shortages and placed an extraordinary amount of orders this year, which may have broken US supply chains, according to industry experts. But the panic buying retailers have been doing has made the problem significantly worse.
Thanksgiving and Black Friday are just around the corner, and both dates mark the beginning of the biggest shopping days of the year. Retailers usually expect to make up for the lost revenue and kick off a buying frenzy that hopefully lasts for months. This year, however, those hopes will be crushed. The congestion at ports is so severe that millions of holiday items will not arrive in time at the stores. Just as consumers, retailers have been panic buying for the holidays as the supply chain crisis raises fears of empty shelves during their most profitable season of the year.
“When people expect there’s going to be shortages for this holiday season, they increase their orders, which led to a dramatic increase in shipping to the US. That’s why we see so many containers in our ports,” Dr. Tinglong Dai, a professor of operations management and business analytics at Johns Hopkins University, told Business Insider. But instead of ensuring inventory for the coming shopping season, the panic ordering resulted in empty shelves, as deliveries are delayed, and many other bottlenecks at many steps along the way continue to keep products out of the reach of consumers.
Experts like Tim Uy of Moody’s Analytics argue that, unfortunately, supply chain problems “will get even worse before they get better”.“As the global economy continues to gather steam, what is increasingly apparent is how it will be stymied by supply-chain disruptions that are now showing up at every corner,” Uy said in a recent report.
It currently takes almost an entire month to ship a container from China to the U.S. West Coast. And when cargo ships arrive with thousands of containers, they are having to wait off the coast of Southern California for up to four weeks before getting unloaded. The cheapest freight rate to carry merchandise coming from China to the U.S. is now in the range of $25,000, a 200 percent increase from 2019 levels. But several big companies are paying premiums at the spot market that can go as high as $100,000. That is leading to a painful price spike once those products hit store shelves.
What a situation the U.S.has gotten into. Everywhere we look we have disruption on top of disruption. And our leaders effectively made our problems a whole lot worse. If you think things are bad now, just wait until the Fed raises rates to try to control rampant inflation. The central bank will take out the air of equity bubbles it inflated throughout the past 18 months, and during that process, it will collapse markets and push the economy back into recession.
At the beginning of the year, many of us were hoping that conditions would improve for the economy. But now we’re stuck in one of history’s biggest traffic jams. This crisis has become so serious that analysts at Bloomberg Economics are calling it “The Big Crunch of 2021″. In a new indicator developed to evaluate the extremity of the problem, the analysts found that supply shortages are now at a 20-year high in the U.S.
With prices hitting new records with each passing week, it’s only a matter of time until we face a re-run of 1970s-style hyperinflation. That’s why saying the situation is chaotic at US supply chains is an understatement. This is a gigantic mess that will take years to solve. And Americans will be lucky if the markets, the economy, and supply chains don’t break down simultaneously before the end of 2021. A lot more trouble is ahead as this perfect storm evolves into a full-blown disaster in the coming months.
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