In 2021, the world’s supply chains felt the weight of increasing global demand. Here are the supply chain stories that dominated headlines over the past 12 months.
While the COVID-19 pandemic has primarily been a public health matter, government restrictions and changes to how supply chains operate wreaked havoc on the economy. These downstream effects were particularly felt as the United States approached the holidays and shoppers looked to stores and online vendors to buy goods.
For about a week in March, the world focused squarely on a small section of the Suez Canal, the Egyptian channel that 12% of the world’s goods pass through. A massive 200,000-ton cargo ship known as Ever Given got stuck in the canal, backing up hundreds of other ships and costing the world about $9.6 billion in trade each day — or about $6.7 million per minute.
Some of the ships added a lengthy two weeks to their journeys and rerouted their vessels around the Cape of Good Hope in Africa. The situation also fueled fears regarding global energy markets and risked sending oil prices spiraling upward. However, because the situation was relatively short-lived, the effect was marginal.
Eventually, the behemoth was dislodged from the banks of the Suez using more than a dozen tug boats and a full-moon high tide, a feat that staved off an even more devastating impact on the world’s supply chains and economy.
China partially closes one of its biggest ports
China, where COVID-19 originated, has taken a strong, almost draconian stance against new outbreaks since the pandemic began. That hard line was seen publicly over the summer when the country partially closed the world’s third-busiest port after a single worker contracted COVID-19.
The Chinese government temporarily halted all inbound and outbound operations at a critical terminal of its Ningbo-Zhoushan port in August. The Meishan terminal, which services shipments to the United States and Europe, was suspended until further notice after a worker contracted the disease.
The port eventually reopened more than a week after it shuttered. Still, it raised concerns that new coronavirus cases in China, the world’s largest exporter of goods, could lead to further supply chain headaches down the road.
Ships backed up on West Coast
One of the most visceral representations of the supply chain crisis was the images of dozens of ships moored off the coast of California eagerly waiting to unload their goods. The Port of Los Angeles and the Port of Long Beach account for roughly 40% of U.S. imports, so having them backed up created headaches all across the country’s supply chain.
The problem was compounded because of the lack of port workers and truckers to take the goods and move them out of the port and because of surging demand in 2021 as people emerged from their virus-induced isolation and returned to normal purchasing habits. Back in October, during some of the worst snarls, imports to the Port of Los Angeles were up 30% in 2021 compared to the preceding year.
Truckers are a critical component of the country’s supply chains and were in short supply in 2021 as the U.S. experienced labor shortages across several industries.
The American Trucking Associations has steadily sounded the alarm about a truck driver shortage. Chris Spear, the president and CEO of the ATA, estimated earlier this year that the industry is now down about 80,000 drivers amid the supply chain crunch — a record high.
One of the proposed solutions to help fill the gap would be to allow those between the ages of 18 and 21 to participate in the labor market after proper training. Currently, federal law permits those under 21 to obtain commercial driver’s licenses, but they can’t drive across state lines, severely limiting their ability to improve the supply chain problems.
The economy is also suffering from a global semiconductor chip shortage. Semiconductors, a vital (and expensive) part of modern-day gadgets and cars, have seen a huge uptick in demand over the past few years, particularly during the pandemic, causing a global shortage.
Some car companies were forced to halt production lines at major factories because of the shortage. Complicating the matter, the U.S. relies on foreign countries such as China to provide semiconductors, so when supply from overseas doesn’t meet U.S. demand, the country finds itself in a bad position. The Senate passed a bill in June with almost $250 billion in new funding for chips, U.S. production, and research.
One of the most prominent downstream effects of the chip shortage included an explosion in the price of used cars, as new vehicles were in short supply. Rental car companies also sold off some of their fleets during the pandemic, and the shortage of available cars led to higher prices for people trying to rent a vehicle.
Biden intervenes in supply chain issues
In light of supply chain challenges, President Joe Biden has sought to use the power of the White House to help. The administration announced in October that the Port of LA would begin operating on a 24/7 basis to move products from overseas into the country more quickly. After meeting with White House officials, several companies such as FedEx and UPS also announced they would scale up operations prior to the holiday season.
The White House also announced a multifaceted plan designed to increase worker recruitment and retention in the trucking industry, given worker shortages. Among the initiatives are helping to connect veterans to the industry and emphasizing apprenticeship programs for would-be truck drivers. The Biden administration said it is also working to make obtaining a commercial driver's license easier, which is required for truckers.