It is a major factor in the rise in inflation and concerns about the recovery of the global economy

The supply chain crisis may last for years

The outbreak of the “Covid-19” pandemic is a major cause of the supply chain crisis.

From the source

The international supply chain crisis has disrupted the economy around the world. The need, for example, to ship surgical face masks to West Africa from China, could affect the manufacturing capacity of a large company such as Ford, and delay the arrival of Amazon orders in a timely manner within days. Holidays.

And the outbreak of the “Covid-19” pandemic is a major cause of the supply chain crisis, and the latter is the cause of the high rate of inflation, according to an article published by the New York Times.

The virus that struck the world at the beginning of 2020, prompted individuals and companies to limit their activities, which led to the collapse of the global economy for a short period, and it is likely that the supply chain problems will continue for several months, if not years.

Factories stopped

With businesses closed, and factories from Asia to Europe and America shutting down, companies laid off workers en masse, taking purchasing power out of the market, the newspaper says.

As manufacturers and shipping companies assumed that demand would fall sharply with fewer goods being manufactured and salaried people able to spend, which did not happen, a more complex situation emerged and was seen as a challenge to the global supply chain.

Accepting the request

And in early 2020, the entire planet suddenly needed masks, surgical gowns, and other medical equipment.

Most of these goods were manufactured in China.

As Chinese factories ramp up their work to meet the new demand, cargo ships have delivered the protective gear around the world.

The pandemic has also led to a buildup of empty shipping containers in many parts of the world.

The result was a shortage of shipping containers in the country that needed it most, China, whose factories were pumping out goods in record volumes.

Despite concern that the economic meltdown will cut spending in many countries, the pandemic has changed the shape of demand. Instead of eating out and attending events, Americans have bought office furniture, electronics and kitchen utensils.

It has also accelerated the shift towards online shopping.

From April to June 2020, as the first wave of the virus spread, Amazon alone sold 57% more merchandise than it did the year before.

Spending encouragement

The United States encouraged spending, through government stimulus programs that mail checks to families, as part of its efforts to revive the economy. of ships, but sometimes waited in lines of 100 ships off the ports of Los Angeles and Long Beach.

Even after unloading, containers piled up on the docks, due to a shortage of truck drivers needed to transport goods to warehouses.

Corporate Struggle

Companies have struggled to hire workers in warehouses and retail.

Even as employers raised wages, labor shortages persisted, exacerbating the scarcity of goods, which translated into one thing: a scarcity of computer chips.

As businesses and consumers respond to the shortage, with early and additional demand, especially ahead of the year-end holidays, this has added to the pressure on the economy.

The supply chain crisis has its roots in the production model that Toyota devised at the end of World War II and spread across the business world, called “just in time” manufacturing, in which companies stockpile as little raw materials and manufactured parts as possible and buy only what you need it.

This model only works when the factory can get what it needs, at the time of actual manufacturing.

But some experts have often warned that the global economy is too dependent on lean production, and that remote factories are vulnerable to the inevitable shock.

The supply chain crisis has become a central political issue, especially with the start of the holiday shopping season and the pressure of the administration of US President, Biden, to compel major ports to expand their operations, and this crisis is also a major factor in rising inflation, which deepens concerns about the fate of the global economy and its recovery from operations. Lockdowns that occurred due to the pandemic.

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