How Global Affairs Have Impacted the Supply Chain Backlog

Did you know that 75% of businesses have been impacted negatively by the supply chain crisis? In every industry, businesses are facing devastating losses due to issues caused by the supply chain crisis. Prices are on the rise, and scarcity is an issue reported by many.

But why exactly is there a global supply chain crisis, and how did we get here? Is there an end in sight? In this article we explore some of the crises affecting the supply chain and if there is a timeframe for when to expect things to get back to normal.

COVID-19 and the supply chain

At the onset of the pandemic in 2020, the world froze. For some, this freeze lasted only a few weeks, but for other industries, it was for months. Many companies were shut down for long periods, unable to manufacture their product.

When the demand for goods went down because of stay-at-home orders, there was not much of an issue with the supply chain; only essential workers were working, and some companies had an excess supply of their products.

However, as demand has increased since the initial lockdowns, the supply side has not been able to catch up yet. As time has gone on, the rise of variants has led to more and more national lockdowns around the world, disrupting the supply of materials and products.

Pandemic lockdowns cause slower shipping times of materials to manufacturers. One example of this is China, where recent lockdowns have slowed port traffic to a screeching halt. Maritime tracking has shown hundreds of ships stuck, unable to dock due to lockdowns.

Throughout this period, the cost of shipping containers has risen 600%. Energy costs have also risen to staggering new heights, and as suppliers attempt to keep up with demand, the cost of fuel to ship a product increases significantly as well. With these changes, the consumer is often the one footing the bill.

Brexit and the supply chain

With less reliance upon the European Union, Brexit has worsened the supply chain crisis in the UK As the country transitioned out of the EU, studies show that trade with other nations was 7% below pre-pandemic levels, but trade with the EU was still 15% lower than pre-pandemic levels.

As the transition period ended, many companies reported making changes to their supply chain. Most often these changes were caused by a shortage in materials and equipment needed to produce items. These companies also acknowledged a switch from foreign to domestic suppliers to meet their needs.

With Brexit also came tighter immigration rules in the UK, which has caused a shortage of workers as many immigrants were forced to return to their home countries. Industries that relied heavily upon these workers, restaurants, and retail, were forced to cut hours and certain services with a smaller staff available.

However, companies like Supply2Gov help businesses grow amid these negative changes. This UK-based company provides the opportunity to find and win public contracts in various fields.

The war in Ukraine

One of the most pressing crises facing the global supply chain is the war in Ukraine. At the time of the invasion, much of the world had economic ties with Russia and Ukraine. As the invasion went on, sanctions were placed on Russia that limited their trade ability and had damaging effects on their currency.

Some have estimated that approximately 600,000 businesses rely on Ukraine and Russian suppliers. At least three major industries have been negatively impacted by the war.

The first is the semiconductor industry. Two Ukrainian companies are the world’s leading producers of neon, which assists in chip production. Both companies have closed down due to the war, unable to operate and export this critical resource in the production of semiconductors.

Russia also contributes to the semiconductor industry, providing about one-third of the global palladium supply. This material is used in sensor chips and certain computers. Some companies do have an excess supply, but if the conflict and sanctions are not resolved shortly, a bigger issue might arise.

Automotive is the second industry impacted by the conflict in Ukraine. Ukraine had a thriving auto industry and supplied key components.

Without the production of these parts, projects have been stalled and companies have been unable to test certain features.

On top of that, the conflict has caused a major railway between Europe and Asia to be shut down. This railway transported both cars and car parts, but now alternative routes need to be taken. Adjusting the transportation of these goods has taken time and has further stressed the global supply crisis.

Some have estimated that this delay in the automotive industry lowers the number of cars produced this year by nearly 1.5 million.

A third industry greatly impacted by the Russia-Ukraine war is energy. Russia is one of the greatest exporters of oil and natural gas. Many European nations have depended on Russian oil and energy supplies, which has become an issue in light of the war.

A major gas pipeline between Germany and Russia was cancelled at the start of the war. With many nations issuing sanctions against Russia, some have also cited a desire to depend less on Russian oil and natural gas.

Countries like the United States and the UK have outright banned Russian oil, and many European nations have already begun looking for alternatives for importing oil and gas. The EU has even stated a desire to decrease Russian imports of oil by two-thirds before the end of the year.

When will there be relief?

There are many reasons for the global supply crisis. The pandemic, Brexit, and the war in Ukraine are all major causes that have a heavy impact on the system. However, most experts do not foresee any relief coming down the line for at least another 2 years.

Any changes that are made will take time to have an impact on the crisis. This is due to the global nature of the supply chain and whether the above negative events stop.

Learn to thrive

With so many issues impacting the supply chain, it can be difficult to navigate the economy and its negative features. There is a high demand for many different products, but there are often available at a high cost. Companies can find creative solutions to lower their costs and still provide a high-quality product.

By using Supply2gov, your company can find and bid on different public sector contracts. The simple system allows you to search for different contracts related to health, government, defence, construction, and more. Find and apply for the best contracts for you and see how your company can thrive.