Experts: Supply chain issues could play Grinch this holiday season

Shipping containers stacked at a port

It might seem a little early to be thinking about Christmas presents, but Miami University Farmer School of Business faculty experts who study and teach about supply chain and operations management say that this year, the holiday season has already started if consumers are looking for gifts to put under the tree on Dec. 25th.

“The global supply chain is still experiencing a lot of disruption and it doesn't look like that's probably going to improve any time into the foreseeable future,” Dr. Lisa Ellram explains.

Or, as Dr. Monique Murfield puts it, “The global supply chain is a mess.”

“Companies are still trying to recover from the start of the pandemic, from things being shut down in different stages around the world. And then business has picked back up quickly as countries have opened back up and demand has come back, and companies are still trying to catch up. As they come into the fall and then looking into the holiday season, they're still behind from before,” she noted. “This is a time when they would normally be building up product to get ready for an additional surge in demand.”

The process by which products get from the manufacturer to the consumer is often invisible to the average person. Click a button on your computer or phone, and a few days later, an item arrives. But since the pandemic began in early 2020, it’s become more apparent that supply chains are complex and some things are harder to come by than others, ranging from new cars to aluminum to cereal brands.

And while it may seem obvious to blame the pandemic for these problems, Dr. Henry Jin says it’s a much bigger issue than Covid-19. “The pandemic is being used as a scapegoat. The pandemic may be a catalyst to push over the first domino, but all the other dominoes have been lined up for a long time now, and simply ending the epidemic doesn't mean all the other dominoes go away,” he said.

Those other dominos include:

  • Parts shortages: “Companies are having trouble getting the materials that they need in some cases to manufacture products,” Murfield, director of the Center for Supply Chain Excellence, explained. “There’s a chip shortage that we've been seeing for a number of months now. People may not realize there's a chip in your toaster, it's not just going into a vehicle or a high-end washer, but really basic things.”
  • Unpredictable consumer demand: “People have been buying weird things in big numbers that they normally wouldn't buy. I heard there was a shortage of car carriers for people who want to go on road trips, There was a shortage of playing cards for a while. There was a shortage of puzzles. There's a shortage of bicycles. People behave differently. They want different things.,” Ellram said. “And that really screws up the supply chain because most supply chains are not made for extreme flexibility. Only custom order items are really made to be flexible. The rest of the supply chains are pretty much made for a known, predictable demand.”
  • Truck drivers: “In the U.S. trucking industry, it is very well known that you have a lot of drivers retiring, and you don't have a lot of new drivers coming in. So there is a driver shortage, and the driver shortage is a significant influence on everything else,” Jin said.
  • Manpower: “The post office is trying to hire 40,000 people right now. UPS is trying to hire 100,000 people. We don't have enough people power to do all the jobs, and that’s true in the warehouses as well,” Ellram pointed out. “It's very difficult, when you're backed up, when you have a bottleneck situation, to work out of that situation when you can't get more people.”
  • Port congestion: “Items coming into the Port of Los Angeles are sometimes sitting for four to six weeks before a ship is unloaded,” Murfield said.
  • Railroads: “As containers are building up in ports and rail yards, railroads are having to suddenly say, ‘All right, my rail yard is completely full. I'm not taking any more containers,’” Jin noted.
  • Shipping containers: “There's no fundamental shortage of containers. There's plenty of containers in the world. It's just that they're all sitting somewhere. They're full of stuff, waiting to move, waiting to be unloaded. What we need is to be able to empty those containers and get them back in circulation,” Ellram said.

And because the dominos are so entwined and interconnected, a problem in one area causes or exacerbates the problems for others. If there aren’t enough truck drivers to move the containers out of the rail yards, the rail yards can’t take containers from the ports, which can’t unload them from the ships, which can’t make return voyages with parts or finished products, which leads to shortages in parts, products, AND containers. 

On top of that, Jin says, you can add less passenger air traffic carrying cargo, inconsistent supplier manufacturing, changing regulatory policies, and tariffs to the mix. “It’s really this perfect storm of shortage and disruption.”

So what does that mean for everyone looking for holiday gifts this year?

“Expect that you're going to need to plan ahead a bit more, because companies might not have things located exactly where they'd like them to be able to get them to you in a couple days,” Murfield said. “Maybe they have them in their supply chain, but they have to ship it from further away than they normally would, or it's not in this local store.”

“Christmas is going to be slim pickings,” Jin remarked. “Expect higher prices, fewer options, and stock shortages.”

“Last year, we saw earlier deadlines for shippers as well as consumers to ship things because they just couldn't handle everything as last minute because it was already backed up, and we’ll likely see that again,” Murfield noted.

“If you know what you want for Christmas, make that Christmas list now,” Ellram said. “If you know what you want, you should try to buy it right now. If it's out there, you should buy it. This is probably not going to be a year for procrastinators at all.”