For many businesses, the efficient movement of goods from manufacturers to markets is crucial. However, this complex network is susceptible to a range of disruptions with far-reaching consequences.
In this article, we explore the biggest supply chain issues that modern businesses face, their impacts across various sectors, and strategies to effectively manage or avoid these problems.
What Are Supply Chain Issues?
Supply chain issues refer to a range of challenges and obstacles that can interrupt or slow down the various stages involved in making and moving products. For companies, supply chain management requires strategic planning, robust risk management, and a flexible approach to operations, ensuring businesses can adapt to changing circumstances and minimize issues.
1) Uneven Supply & Demand
Uneven supply and demand occur when the production of goods can’t keep up with consumer demand or vice versa. The COVID-19 pandemic is a prime example where consumer demand surged due to panic-buying and home-based activities, while production lagged because of factory shutdowns, labor shortages, and various health concerns.
- Stock shortages: Essential items become scarce on shelves, leading to difficulties in obtaining products for both businesses and consumers.
- Higher prices: The imbalance between supply and demand leads to price inflation, as the limited availability of products allows sellers to demand higher prices.
- Competition and supplier relations: As businesses compete for limited resources, the strain on supplier relationships increases, potentially leading to long-term sourcing issues.
The future of supply and demand balance is uncertain and varies across different industries. Some sectors show promising signs of adaptation and recovery, while other industries still face ongoing disruptions.
The landscape is being reshaped by factors like changes in consumer behavior, economic fluctuations affecting spending power, and advancements in technology that improve demand forecasting and allow supply chains to be more agile in response.
Businesses can mitigate these risks by diversifying their supply sources. This reduces the risk of relying too heavily on one supplier and helps cushion against unforeseen spikes in demand. Building strong relationships with these suppliers is another key for coordinated risk management.
Using predictive analytics is also becoming increasingly important for better forecasting of demand and efficient planning of production. Additionally, keeping open lines of communication with customers is essential to manage their expectations and maintain trust when supply chain issues arise.
2) Labor Shortages
This issue has become prevalent due to a mix of factors. This includes demographic shifts, such as an aging population leading to a wave of retirements and younger workers seeking careers outside of traditional supply chain roles. The long-lasting effects of the COVID-19 pandemic have also played a role, with health concerns, caregiving responsibilities, and changes in career preferences reducing the available workforce.
Specific difficulties faced by certain industries, like the chronic shortage of truck drivers and the need for skills aligning with new technologies in manufacturing, further worsen the problem.
- Delayed Production: A reduced workforce leads to slower production rates, causing delays in fulfilling orders and meeting customer demand.
- Increased Labor Costs: To attract and retain workers, many companies have had to increase wages, leading to higher operational costs.
- Inefficiency in Operations: With fewer hands on deck, the efficiency of supply chain operations takes a hit, leading to longer turnaround times and potential errors.
Economic conditions will play a big role in the future of labor shortages in many ways—on one hand, employers and workers alike may have a better ability to invest in education, training, and assistive technologies.
Conversely, economic recovery often leads to increased demand for goods and services, and as businesses strive to ramp up output to meet this rising demand, they may find it challenging to quickly recruit and train enough skilled workers.
Plus, advancements in supply chain technologies and an aging workforce will likely widen the skill gap.
Businesses can invest in automation to boost efficiency, as well as training programs to upskill workers. Additionally, enhancing workplace conditions with competitive benefits and flexible policies can attract and retain diverse talent for a more resilient supply chain.
3) Raw Material Shortages
Shortages in raw materials most often happen due to increased demand, geopolitical tensions, and environmental issues. The struggle to secure vital components, such as rare earth minerals and specific agricultural products, is worsened by political conflicts and trade disputes, while climate change and natural disasters impact the availability and cost of essential raw materials.
- Rising costs: Scarce raw materials drive up production costs, affecting the entire supply chain from manufacturing to retail pricing.
- Increased demand: Scarcity also leads to heightened competition for available materials and the consumer products that require them, further intensifying demand and worsening shortages.
- Increase in overall inflation: With parts like lumber and semiconductor chips in short supply, the price of various basic commodities (such as cars and housing) rises, ultimately contributing to overall economic inflation.
The future supply of materials depends on the resolution of geopolitical conflicts, investment in alternative sources, and technological advancements—making it difficult to predict.
Government incentive programs, such as the CHIPS and Science Act, have led to an increase in production facilities in certain sectors. However, getting these plants up and running typically takes multiple years, which means relief from material shortages may not be immediate.
The shift toward sustainable and locally sourced materials is also influencing the landscape, with companies exploring more environmentally friendly and geographically closer sources.
To manage material shortages, businesses should diversify their supplier networks to reduce reliance on a single source and explore alternative materials to keep their production stable. Additionally, improving inventory management through advanced forecasting and maintaining strategic stock levels can help mitigate the impact of shortages.
4) Political Instability
This usually refers to changes in government, social unrest, or conflicts, which can have a direct and rippling effect on global supply chains. Political stability or instability in key regions can significantly influence global trade dynamics, impacting everything from sourcing strategies to pricing.
- Fluctuating prices: Instability and political uncertainty can lead to volatile commodity markets, causing rapid fluctuations in prices of raw materials and other goods.
- Disrupted trade routes: These issues can cause key shipping lanes or ports to close, leading to delays and rerouting of cargo.
- Stranded cargo: Political events can result in shipments being held up or lost due to new trade barriers or restrictions, having significant financial impacts.
The long-term outlook of these supply chain problems is complex and uncertain. It heavily relies on how quickly and effectively conflicts are resolved or avoided, and how stable trade agreements are established.
In the event of prolonged instability, businesses may be compelled to reevaluate and potentially redesign their supply chain networks to mitigate risks. This could involve diversifying sourcing locations, investing in more localized supply chains, or enhancing flexibility in logistics to adapt to changing political climates.
Businesses can tackle these risks by conducting regular geopolitical risk assessments to guide decision-making. For small businesses, this can be done by staying informed about global news and seeking advice from trade specialists. Preparing contingency plans for key supply chain operations is crucial to quickly respond to disruptions. Additionally, exploring alternative markets and suppliers can reduce dependence on unstable regions.
5) Transportation & Logistics Bottlenecks
Bottlenecks in transportation and logistics have widespread effects on every stage of the supply chain. These initial issues are primarily caused by congested ports, which slow down the movement of goods. Infrastructure problems, like poor roads, outdated railways, and shipping container shortages, also contribute to these delays, as well as complex regulations and customs processes that can hold up shipments.
- Delivery delays: Bottlenecks extend the time it takes to receive and dispatch goods, leading to prolonged order fulfillment cycles. This not only impacts customer satisfaction but also disrupts inventory management, causing challenges in stock availability.
- Increased transportation costs: Frequent delays and logistical hurdles result in added storage, rerouting, and late delivery fees. These additional costs can strain logistics budgets and may ultimately lead to higher prices for consumers.
- Overall inefficiencies: These issues slow down the functioning of the entire supply chain, affecting inventory control and production schedules.
Increased investments in infrastructure (such as upgrades to roads, ports, railways, and shipping container availability) will enhance the future efficiency and capacity of supply chains, along with the implementation of advanced logistics technologies. Better regulatory frameworks are anticipated to streamline customs processes and international trade policies, also helping to reduce supply chain delays.
Businesses can navigate supply chain bottlenecks more effectively by diversifying their transportation modes (i.e., air, road, sea, and rail), which reduces the risk of relying on a single method. Using advanced logistics technology also plays a crucial role, enabling better tracking and management of shipments.
Additionally, strategic planning helps businesses anticipate and prepare for potential disruptions, ensuring smooth operations. Working with a tech-based 3PL (third-party logistics company) like Flexport can help small businesses get access to these solutions without hefty investments.
Read about our other top 3PL picks for logistics, storage, order fulfillment, and more in our best third-party logistics companies buyer’s guide.
6) Cybersecurity Threats
As supply chains evolve and integrate more digital elements, they become more vulnerable to cyber threats. This heightened risk includes various forms of cyber-attacks—such as data breaches, where sensitive information is accessed illegally, and disruptive malware, which can interrupt or damage essential digital systems.
The increasing reliance on technology for managing supply chains means that a single cyber incident can have far-reaching effects on supply chains.
- Digital disruptions: Cyber threats can disrupt communication across supply chain networks and compromise data accuracy. This often results in skewed inventory levels, inaccurate shipping schedules, and unreliable supplier information.
- Operational disruptions: Cyber attacks can also impact physical aspects of supply chains. For example, breaching a manufacturing system can stop production, create inventory shortages, and affect sales.
- Financial and Legal Consequences: After a cyber-attack, companies might incur financial losses from operational downtime, expenses in resolving the breach, possible fines for data breaches, and harm to business relationships with affected partners.
As supply chains become more digital and connected, the risk of cyber threats is on the rise. Advanced technologies like artificial intelligence, the Internet of Things or IoT (which links numerous devices and systems online), and blockchain (a decentralized ledger technology) add new layers of security challenges. This makes these systems increasingly vulnerable to complex cyber-attacks.
With supply chains stretching globally, there are more opportunities for cyber threats to occur, adding to the cybersecurity complexity. Additionally, keeping up with changing data protection laws presents another hurdle for businesses.
Investing in robust cybersecurity measures is the best way to safeguard supply chains against cyber threats. This involves implementing advanced security protocols and technologies to detect and prevent cyber-attacks.
Equally important is the role of employee training, which ensures that staff are aware of potential cyber threats and know how to respond effectively. Regular system audits are also essential, as they help identify and address any security vulnerabilities.
7) Regulatory Changes & Trade Policies
Regulatory changes in global trade, such as new customs rules, tariffs, and environmental and safety standards, significantly affect how businesses transport goods internationally.
These regulations, while aimed at ensuring fair trade and safety, can add difficulty and cost to the process of transporting goods across borders.
- Longer processing times: Changes in customs regulations can lead to longer processing times at borders, affecting the speed of deliveries.
- Increased sourcing costs: The introduction of new tariffs can alter the cost-effectiveness of sourcing materials from certain countries, prompting businesses to reconsider their supply chain strategies
- Increased transportation costs: Stricter environmental and safety standards can require businesses to make greater investments in more sustainable and secure transportation methods, raising costs for 3PL transporters and clients alike.
Regulations and trade policies are dynamic and will continue to evolve as long as global trade exists—so the pressure on supply chains is not expected to let up. Rapidly changing factors including geopolitical shifts, economic changes, technological advancements, and environmental concerns will all impact the future of this issue, meaning businesses must be prepared to continuously adapt.
To manage risks from regulatory changes, it’s important for businesses to keep a close watch on new policies and regulations. Joining trade associations that influence policy can be beneficial, as well as maintaining a business model that can adapt easily. For instance, sourcing materials from different countries can reduce the effects of tariffs, and implementing eco-friendly practices can help meet evolving environmental rules.
Planning ahead and maintaining good communication with government agencies and supply chain partners are essential for handling these challenges successfully.
8) Climate Change
Climate change poses significant risks to supply chains, from sudden extreme weather events to long-term changes in agricultural output.
The regulatory landscape is also shifting to create new rules to mitigate climate changes, such as implementing stricter emissions regulations for transportation, mandating sustainable sourcing practices, and enforcing stricter waste management policies, which supply chains have to adapt to by changing their processes. Read more in our detailed run-down of the top sustainability trends in retail.
- Disrupted production capabilities: Extreme weather events can impact manufacturing facilities and their workforces, leading to shutdowns, damage to infrastructure, and disruptions in production schedules.
- Raw material availability: Climate change affects the availability and quality of raw materials, especially in agriculture-based industries, leading to supply shortages and increased prices.
- Transportation routes: Weather conditions can disrupt key transportation routes, causing delays and requiring rerouting of shipments.
- Regulatory changes: Adapting to new environmental regulations can require significant changes in logistics and supply chain management, adding complexity and potentially increasing costs.
As climate change continues to be a pressing global issue, its impact on supply chains will grow stronger and more complex. Leading experts predict an increase in both the frequency and severity of extreme weather events, which can disrupt transportation and production. Additionally, gradual shifts like changing agricultural patterns will likely require long-term adjustments in sourcing and distribution strategies.
To manage the risks posed by climate change, it’s essential for businesses to invest in sustainable practices. This includes adopting eco-friendly transportation, using renewable energy sources, and minimizing waste in operations—as well as partnering with suppliers who prioritize sustainability in their operations.
Developing adaptable supply chain models is also crucial, allowing for quick responses to environmental disruptions. Beyond individual efforts, contributing to broader climate change mitigation initiatives (like reforestation or supporting sustainable agriculture) can help create a more resilient global supply chain environment.
Why Do Supply Chain Problems Matter?
Supply chain issues often have ripple effects, making their impact significant. An issue during the earliest steps of sourcing raw materials for a product can change the dynamics of its entire industry, or even the economy as a whole.
Here’s how supply chain problems affect key areas:
- Businesses: Businesses face increased operational costs, inventory management challenges, and potential revenue loss. The inability to fulfill orders on time often affects customer relations and brand reputation.
- Consumers: Consumers are hit with limited product availability and increased prices. The delay in getting desired products impacts consumer satisfaction and alters buying patterns.
- Industries: Specific sectors are hit harder than others due to their reliance on specialized parts and materials from around the world. Disruptions can cause market imbalances, impacting supply and demand. This often leads to wider industry effects, influencing even companies not directly affected by the initial problem.
- Economies: Supply chain issues can lead to inflation, impacting economies both locally and globally. These disruptions often result in GDP (gross domestic product) changes and can influence key monetary policy decisions aimed at stabilizing and guiding economic growth.
Is This the New Normal for Supply Chains?
The current state of global supply chains is characterized by delays, increased costs, and unpredictability, which has been the case since the onset of the COVID-19 pandemic in early 2020. Some supply chain issues have improved or resolved, while others persist or even worsen. This poses the question: Is this a temporary phase or a new normal?
Factors like ongoing global tensions, environmental changes, and technological dependence point toward some level of disruption being a continuing trend. In addition, the shift toward more digital, interconnected supply chains creates new vulnerabilities and complexities.
This evolving landscape, combined with the likelihood of future global events impacting supply and demand, suggests that businesses may need to adapt to a new standard of flexibility and resilience in their supply chain strategies, maybe making this state of constant change the ‘new normal’.
Frequently Asked Questions (FAQ)
Click through the questions below to learn more about supply chain issues.
In 2024, supply chains remain disrupted due to ongoing factors from the COVID-19 pandemic, geopolitical tensions, technological challenges, and the growing integration of businesses and economies around the world.
Apple’s extensive global supply chain and resource-intensive production operations have caused it to face supply chain issues, especially those related to climate change risks and regulations. To address these challenges, Apple has taken steps to reduce its carbon footprint and enhance supply chain resilience.
A recent example of a supply chain disruption is the global shortage of computer chips, which affected industries such as automotive and electronics. The shortage resulted from increased demand coupled with production and transportation issues during the COVID-19 pandemic, leading to delays and increased costs for businesses reliant on these chips.
The duration of supply chain issues depends on the specific causes and factors involved. For instance, the semiconductor chip shortage is getting better, while the shortage of truck drivers is consistently increasing and has become an ongoing challenge for logistics. Businesses will need to continue working to address supply chain issues and improve supply chain resilience.
Supply chain issues are numerous and complex, and their impact is far-reaching. Although conditions have improved since the days of the 2020 COVID-19 pandemic, manufacturers, 3PLs, retailers, other businesses, and even end consumers all continue feeling the effects of evolving supply chain problems. So, while the current supply chain landscape might not remain static forever, the need to stay informed and adaptable is likely the “new normal.”