Covid-19 is casting a long shadow on supply chains at the start of the new year.
In the pandemic’s aftermath, businesses need to prepare for what follows. This year we expect to see a year of adjustment. Stated otherwise, 2021 will likely be a year of resilience and stabilization.
It only makes sense that after last year’s turmoil, business leaders and supply chain professionals take proactive steps to avoid continued disruptions from last year.
This post will discuss two major disruptions affecting supply chains today.
Now, let’s dive into those issues. Let’s start with the issue that may have the largest impact: A Second Wave.
The Threat of a Second Wave
A return of Covid-19 has struck and has returned with a more virulent strain. And with it comes more uncertainty. Several vaccines are out, but no one is sure whether the recently developed vaccines are effective against this second wave.
Here’s the backdrop setting the stage for future disruptions.
First, the second Covid-19 strain is making its way around the world. Second, China is shutting down major cities bringing back visions of last year’s drastic quarantines. Third, the U.S has multiple reported cases of the new, more virulent strain.
More alarming, is that the spread of this new strain has hit the ports of LA and Long Beach hard. Infection rates at these ports is higher than state and national averages. As of January 17, 2021, 694 dock workers tested positive.
Moreover, 1,080 union workers have been exposed to personnel with the virus. With infection rates exceeding state and national averages, there’s talk of ports closures.
Keeping these ports open is critical to the economy. There’s no question about that. So you can expect authorities to do whatever it takes to keep them open. That said, the likelihood of a partial or total shutdown is unlikely. At least, that’s the public message.
The pending roll out the vaccine may warrant this optimism. But dock workers must get a higher priority for receiving the vaccine. Otherwise, ruling out partial closures may prove too optimistic.
Shutting down the ports, partially or completely, would reverberate through supply chains with damaging effects. Hence, planning for a “doomsday scenario”, as it’s called, is not far-fetched.
Continuing Capacity Constraints
With the “doomsday scenario” out of the way, let’s focus on something more mundane. Capacity constraints. That became an issue last year, and it’s carrying over into 2021.
Tight capacity is the crisis du jour. It’s tough to resolve given the dynamics at work. Supply built up as officials put quarantines in place. And we saw the release of pent-up demand, as economies opened-up. That resulted in a big mismatch between supply and demand, that’s still playing out.
So, constrained capacity remains a lingering issue disrupting supply chains.
To mitigate capacity shortages, businesses resorted to alternative means of moving freight. Omnichannel supply chains cropped up, and retailers began using their stores as distribution centers.
Also, Less-than-Truckload (LTL) became a go-to source for relieving capacity constraints. Air freight also saw an in increase in shipping cargo. So did rail.
Taking a multi-modal approach helped to a degree. However, now supply chains must prepare for the massive distribution of vaccines. This distribution will have secondary and tertiary effects.
First, we have the use of capacity to distribute vaccines. Next, we have the distribution of associated equipment and supplies.
Both will place more demands on already constrained capacity. They will further constrain tight capacity displacing shipment of non-vaccine cargo by other means.
Shipping capacity will remain tight and will have attendant consequences. Increased shipping costs is one of them. We can expect additional challenges to both performance and cost.
The time to begin exploring workable alternatives is now.
Are You Prepared for 2021?
We know that some issues caused by Covid-19 last year will carry over into 2021. We also know a lack of appreciation of Coivd-19’s enduring effects can disrupt supply chains.
Nonetheless, based on lessons learned, from the pandemic, we shouldn’t see volatile disruptions. Still, challenges will remain.
Businesses that anticipate and prepare for pandemic-related disruptions, will outperform those that don’t. That seems obvious. But many businesses will let their preoccupation with daily issues consume them.
One big issue impacting a return to stable operations is Covid-19’s Second Wave. We’re witnessing that now at LA/LB, as infection rates continue to climb.
Yet, port officials remain confident the “doomsday scenario” – shutting ports down – won’t occur.
Is this wishful thinking or not?
Regardless, businesses and 3PLs must remain vigilant. They must be aware of Covid-19’s enduring adverse effects. That includes the full spectrum – from the likely to less likely – in planning for 2021. The roll-out of the vaccine and capacity constraints are just the headline issues.
You can plan independently. Or you can plan with a trusted 3PL partner like American Global Logistics. We have a broad range of skills, capabilities, and services. We have a strong team supported by understanding leadership.
If you need help in preventing, avoiding and/or mitigating supply chain disruptions, contact us today. We’d like to hear from you.
Contact us to find out about partnering with us as you plan for 2021.
And… keep reading our weekly posts. We cover relevant issues affecting your supply chain. We do that to help you stay ahead of disruptive change in our constantly changing business.