Supply chain issues have been affected greatly by recent events. Manufacturing bottlenecks have appeared globally, affecting thousands of industries. Supply chain issues have seen the downfall of many of these companies and dampened the dreams of potential entrepreneurs starting up their businesses. What is the primary example and what are western governments doing to tackle these issues as a whole?
Bottlenecks
Supply bottlenecks are caused when a product in high demand (usually a component) has had a drastic reduction in production. The Covid-19 pandemic caused these production bottlenecks industry-wide. The main one you may have heard about was the computer processing chip shortage. These chips seized production during the pandemic as the demand for electronics plummeted. The products greatly affected are cameras, televisions, washing machines, automobiles, and pacemakers. The statistics show this computer chip shortage has increased the new car cost in the US by 11%. This has had a drastic impact on the automotive industry, as dealerships can be seen marking up their products dramatically, blaming the cost of stock on this shortage.
The microchip shortage is estimated to have cost the US economy 240 billion Dollars in 2021, and the issues surrounding this backlog in demand are set to continue into 2024 at the very least.
How Is This Being Tackled?
The Biden administration has worked with the government and private sectors to prevent this issue from recurring. The chip shortage is here to stay and regulate itself. In due course, the best action to take is to set up prevention methods in the case of another pandemic-like event. Early 2022 saw Intel announce a $20 billion factory, which will begin manufacturing these microchips, helping the United states solve this problem within its borders. This plant will take time to construct but is a sure-fire method to reduce the impact in future scenarios and was surely government-assisted in terms of funding.
Supply Chain Management
The three main pillars of supply chain management are strategy, service, and cost. The recent Russian invasion of Ukraine brought up another supply chain bottleneck for automotive manufacturers. Ukraine, as a nation, was responsible for producing automotive wiring harnesses for 22 manufacturers across the world. The invasion halted 30+ factories in the country, for obvious reasons, leaving behind a supply chain bottleneck for new cars in mainland Europe especially. This vital component mirrors the microchip problem as, without something that was once considered simple, a vehicle cannot function.
Vehicle manufacturer Skoda, located in the Czech Republic, decided to act about the wiring harness shortage. The shortage caused them to delay a brand-new SUV, named the Enyaq, greatly affecting their profits. The executive decision was made for Skoda to begin manufacturing their wiring harnesses to tackle this bottleneck and protect the future of the Volkswagen group in the event this occurs again. This was likely done at great cost, but strategy, service, and cost are all involved in the decision making. The process must have taken place in this supply chain strategy.
What Is the EU Doing to Tackle These Issues?
The European Union has recently proposed the single market emergency instrument. This approach to supply chain issues will allow governments taking part to prioritize the manufacturing of key components. Not only does this mean they will be directly affecting the processes of businesses far and wide, but it also gives them the right to command the overproduction of products so their chosen nation has a surplus of key items. Likely, this proposal is not sitting well with the private sector. This is another example of a government body reacting to the recent supply chain issues suffered globally.
