Supply chain disruptions will get worse, Moody's predicts

Supply chain bottlenecks that are being felt across the globe are going to get worse, according to a Moody's Analytics report published Oct. 11. 

Five key takeaways from the report: 

  1. The weakest link of the global supply chain may be the shortage of truck drivers. Driver recruiting firms report having one qualified driver for every nine job postings, the report found. The shortage of drivers is largely responsible for congestion at ports around the globe.

  2. Another major factor in the global supply chain disruptions is the varying pandemic policies in each country and the lack of a concerted effort to ensure the smooth operations of the global logistics and transportation network. For instance, different countries have authorized different types of COVID-19 vaccines, and some transport workers have had to receive multiple types of vaccines to be able to travel across borders. Outside of the European Union, there is no verification system for vaccinations across borders.

    Additionally, vaccination rates among transport workers remain very low, less than 25 percent by some estimates.

    "Harmonization of border protocols and increased vaccination of essential travel workers are a must if the global logistics and transportation industry is to forge ahead," the Moody's report states.

  1. The shift toward using larger ships, which initially helped move more containers across borders, is also exacerbating supply chain challenges, according to the report. Larger ships require more truck, train and warehouse capacity to load and unload, leading to more containers being affected by any potential delays or bottlenecks in the process. Shipping vessels and containers are now spending more than twice the amount of time at port than they were before the pandemic, the report found. Container prices are also skyrocketing, and circulation isn't keeping up.

  2. Railways are also facing labor shortages, and air freight costs eight times more than shipping by sea, so switching to air transportation would be very expensive.

    A recent report from the Institute of International Finance found that more than 70 percent of all major economies are expericinging significant delivery delays, with inflation rising in many places as a result, the Moody's report said.

  3. Three factors make it challenging to overcome the current global supply chain bottlenecks, according to Moody's Analytics:

    1. The difference in policies between countries in regard to the pandemic. For instance, China's goal is to keep COVID-19 cases at zero, while the U.S. and Indonesia are willing to live with COVID-19 as an endemic disease. It's hard to synchronize the rules by which transport workers can move in and out of ports around the world.
       
    2. A weakness in one link of the supply chain ripples throughout the entire supply chain. For instance, truck driver shortages lead to congested ports, which lead to difficulties with booking containers.

    3. Creating new supply is challenging. Building new ships takes time, and likely won't be ready before 2023.

Read the full Moody's Analytics report here

 

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