The Impact of Supply Chain Shortages on Businesses and Consumers

Sangini Bhargava
February 10, 2022
February 10, 2022
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The Impact of Supply Chain Shortages on Businesses and Consumers

Imagine standing in your favorite grocery store with a long list of items in your hand and empty shelves staring back at you. You are probably thinking, “This can’t be right! Where are all the groceries? Why has this store not been restocked yet?”

Unfortunately, supply chain shortages are impacting more than just grocery stores. There is also a strain on electronics, car parts, and clothing. Businesses are experiencing a financial strain while also trying to maintain positive relationships with their employees and consumers.

What’s Causing Supply Chain Shortages?

A big factor causing supply chain shortages is a decrease in warehouse workers and truck drivers. The U.S. Labor Department reported a record 490,000 job openings in July alone—while the trucking industry has a shortage of over 80,000 drivers.[1] Retirement and burnout are the key reasons why companies are losing drivers, and it takes time and resources to replace a skilled worker and bring a new worker up to speed.

Another key factor for these shortages is how countries are responding to the pandemic. Each has taken a different approach toward handling the supply chain crisis, especially in terms of the longevity and intensity of lockdowns and restriction measures taken.

America has decided to open quickly whereas Asia, for example, is still hesitant, creating major implications for international trade. For example, in China, when a Covid case or variant is identified, the entire port will close until it is safe to return to work again. Given that many manufacturers rely on overseas production to control labor and material costs, this type of seaport disruption has driven up the price of moving goods.[2] Many businesses will have to decide if sea transport is still the best financial decision for them.

What’s the Impact on Businesses?

On top of managing product shortages and increased delivery times, businesses are also struggling with global labor shortages. Many workers are retiring while others are voluntarily quitting their job for another with more pay and benefits. According to a recent survey, from the U.S. Labor Department, in August there were over 10 million jobs available while the number of people resigning rose to over 4 million. [3]

Many restaurants and small businesses closed their doors because they could not afford rent or because of employee shortages. Larger companies have stayed afloat due to higher spending power and being able to pre-order products in bulk. By contrast, small businesses that have managed to reopen continue to struggle with suppliers and keeping their shelves fully stocked for customers.

What’s the Impact on Consumers?

We are all consumers and have all felt the strain that these shortages have had on us. Whether you are trying to find toilet paper, or buy a new car, or maybe a new laptop, either the product is not available or the price of it has increased dramatically. For those with families, the biggest concern is putting food on the table and making sure the house is filled with only essential products. However, when you arrive at the store and the shelves are empty, what do you do?

Unfortunately for businesses, if they are not able to meet demand, the consumer will go elsewhere. According to the September 2021 edition of the C-store Shopper Trends Report, 45% of consumers indicated buying less to make up for price increases.[4] And from an e-commerce perspective, in a study of 1,300 U.S. consumers, 67% said they would not shop with a brand again after a poor delivery experience.[5] Once price and shipping times increase the chances of consumers buying significantly decreases.

Lessons Learned and Suggestions for the New Year

We are now two years into the pandemic and shelves are still empty, businesses are struggling with high demand and slow shipping times, employee shortages are at their highest, and consumers are hesitant to buy in fear of never receiving their order.

However, businesses are starting to change their mindset and reconsidering what needs to change. These may include reevaluating planning and forecasting processes, ensuring the best technology is utilized and up to date, rethinking modes of transportation and their costliness amongst different suppliers, identifying risks, and creating contingency plans.

If you or your business need help to redefine business goals or determine the success of your Supply Chain Process, Collective Insights may be able to help. Click here to learn more about our Supply Chain Transformation services.