By Chelsea Jarosh, Industry Analyst
Supply chain disruptions pose a serious impact on the federal government, businesses, and society. Everyone has felt the impact of inflation, higher prices, smaller quantities of available goods, and much longer wait times to receive purchased items. These disruptions have made it extremely costly and difficult for businesses and government agencies to meet the expectations and demands of their consumers.
What are the top supply chain issues the federal government faces?
When global supply chain issues begin, the federal government usually sees vulnerabilities within transportation and shipping routes, sustainability of inventory, and manufacturing job declines.
1) Long lead times and materials shortages — Complications at ports mixed in with lockdowns have led to unpredictable wait times causing a massive materials shortage. The Federal Government outsourced much-needed medical equipment from Mexico, China, and other countries during this time. Many companies even resorted to outsourcing as a way to save money.
2) Increasing logistics costs — Logistics costs continue to rise due to trucking hardships, exacerbating supply chain issues. Diesel fuel is at an all-time high with no indication of declining anytime soon. Labor costs also continue to rise due to inflation, which includes the trucking industry’s continuous and long-lasting driver shortage.
3) Changing and unpredictable consumer demand — Due to the pandemic, consumers’ needs have shifted. They started to buy in bulk not knowing when they would be able to get back to the store. This resulted in consumers shopping less frequently than they normally would, which led to suppliers producing more materials to keep up with the increased demand for certain items.
4) Manufacturing constraints and inflexible operations — Rising demand for certain products and a shortage of workers have led to inflexible operations. Certain equipment was used for producing a particular amount of goods, but when the demand for goods increased, the equipment had to handle larger quantities. For some equipment types, it was nearly impossible to keep up with the increased demand for goods. Not only were companies facing equipment hardships, but they were also faced with an insufficient number of workers needed to fulfill the increase in orders. Production, flow, and storage constraints all played a huge role in the supply chain domino effect.
5) Environmental risk and natural disasters — Extreme weather conditions, natural disasters, and geopolitical events can also negatively affect the supply chain. For example, the Texas freeze in February of 2021 caused the worst involuntary energy blackout in U.S. history. The outages forced semiconductor plants and railroads to close. These closures ultimately caused major supply chain links between Texas and the Pacific Northwest for three days.
What more can the federal government and industry do?
The next steps for the federal government to stay on top of supply chain disruptions are:
- Implement policies that could curve the cost of production, such as tax cuts, lower interest rates, regulations, and subsidies.
- Create policies that help ease transportation jams, manage labor shortages, improve domestic production, and mitigate geopolitical tensions.
- Stay on top of scheduled studies and reports that assess supply chain vulnerabilities and strengthen overall resilience.
As the federal government comes up with new ways to appropriately plan and curve supply chain issues, companies should also be doing their own due diligence in monitoring supply chain trends. Although companies cannot completely avoid supply chain issues, they can anticipate manufacturing and supplier delays by keeping a close eye on the market, customer demand, and government regulations. The most important thing while trying to navigate the challenges is to avoid overselling and over-promising goods while also anticipating stock needs as demand increases.