The Fix for the Broken Supply Chain

Oct 28, 2021 | Additional Insights, Investing, Saving & Investing

“One of these mornings
The chain is gonna break.
But up until the day
I’m gonna take all I can take.”

-Aretha Franklin “Chain of Fools” 1968

The Supply Chain Is Broken

When it comes to the global supply chain, the morning has arrived when the chain did break; the system could no longer take all it could take. Steps taken around the world to stem the spread of the COVID-19 pandemic, such as factory shutdowns and lockdowns, coupled with increasing consumer demand driven by government stimulus and post-recession consumer spending, has led to fewer items on store shelves and higher prices for many goods and services.

What is the Global Supply Chain?

The global supply chain is a network spanning multiple continents for the purpose of supplying goods and services, involving the flow of information, processes, and resources. For example, you or someone you know is probably staring at an iPhone screen at this very moment. While the iPhone is designed at Apple’s headquarters in California, Apple purchases components from suppliers in 43 countries across six continents, sends the parts to China for assembly, ships the completed iPhones to warehouses, and finally delivers them to retailers around the world to sell to consumers. The component suppliers use gold from Peru, copper from Chile, and rare earth minerals mined in Mongolia. Any major disruption in this chain of processes, such as a manufacturing shutdown or shipping bottleneck due to a global pandemic, can slow down the timeframe from iPhone production to iPhone purchase.


Who Will Fix the Supply Chain?

Many analysts and economists, including the Federal Reserve, believe that the significant supply chain issues we are seeing now will start to resolve by the second quarter of 2022. Who will fix the supply chain? The last time we saw peak inflation was the period of 1978 to 1983 when the term “Supply Chain” was just being coined as a specialization in business. Many United States based colleges began offering degrees in Supply Chain Management around 1996. Today, we have 11.5 million employees in the United States whose primary focus is supply chain management for their employers.

In other words, inflationary pressures from the late 1970s and early 1980s gave rise to supply chain management as a way to address higher input costs. The United States and other countries began to develop the skill sets needed to help resolve inflation issues. While there is no quick fix for this complex problem, with 11.5 million experts in supply chain management in the United States and other supply chain experts worldwide, the resources and specializations are in place. Now all we have to do is give them time to make the necessary repairs.

Summary

  • Disruptions in the global supply chain caused by the COVID-19 pandemic are leading to supply shortages and higher prices.
  • Many experts believe this is temporary and will start to resolve by the second quarter of 2022.
  • There are millions of supply chain management experts whose job is to solve the problems we are currently facing.

1. Global Supply Chains | CIPS

2. Inside the iPhone: How Apple Sources From 43 Countries Nearly Seamlessly (thomasnet.com)

3. Extraction of Raw Materials | iPhone Commodity Chain (osu.edu)

GreenUp Wealth Management is a registered investment adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies.  Investments involve risk and unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.

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  • The GreenUp Wealth Management Team

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