Global commerce has been rocked by ongoing crises regarding supply chains, with specific and severe ramifications for businesses in certain parts of the world. Microchips have been in short supply for more than two years, resulting in shortages of consumer electronics and a historic rise in price of second-hand vehicles in the UK. The UK specifically is also enduring a food shortage, with bare shelves in supermarkets hitting consumers alongside a huge upward swing in inflation.
Navigating these issues represents a once-in-a-generation challenge for businesses in the UK. What are the root causes of the supply chain disruption, how exactly are they affecting businesses and what can be done to mitigate those effects?
What is Causing Supply Chain Issues?
Supply chain issues are being experienced across industries, but for a number of distinct reasons. In the UK, a sudden shortage of HGV drivers created disruption of food and household goods supplies in the run-up to Christmas 2021, partly due to Brexit legislation deterring EU nationals from applying for UK visas. An ongoing microchip shortage, initially caused by a shortage in raw materials, was exacerbated by the coronavirus pandemic; demand for tech increased significantly, while factories closed as a result of localised outbreaks.
One major and high-profile disruption to global supply occurred in March, when the Ever Given container ship grounded itself in the Suez Canal – blocking trade through it, and stranding an expensive payload of goods. This disruption in particular highlighted the fragile nature of the global supply chain, with a single tanker delaying the shipment of high-demand products for months.
The Effect on Businesses
Different businesses have been affected in different ways by the shortages that have affected them. For example, the microchip shortage resulted in a slowdown in production of new vehicles, meaning showroom shortages which precipitated a rise in second-hand car prices. Likewise, tech manufacturers like Sony have experienced production shortfall, with their sought-after PS5 console fetching up to double its retail price on online marketplaces.
Navigating Supply Chain Issues
Attempting to navigate these supply crises as a business can be an existential issue, especially where product shortages are resulting in a commensurate shortfall in revenue. The best form of mitigation for businesses ultimately lies in preparation; evaluating the risks and results of shortages before they occur can help businesses effectively plan their way around them.
Finances are the first place to look, as paying suppliers on time is the most effective way to keep regular supply incoming. Open banking solutions can help businesses manage payments to suppliers, and regulate payments without much administration. Budgeting for increased stock of a product or resource can shore your business up against potential future shortages.
As for reactive options when it comes to supply shortage, open communication with clients and customers is an effective way to mitigate effects to your customer base. Instituting a priority service for bigger or more lucrative clients can keep cashflow steady, while alternative supply options are considered.