The festive season is fast approaching, and with it the stress of gift giving. In fact, some families have already started shopping: the big concern this year is the disruption of supply chains, and the risk that many toys and gifts will not arrive in time. It's best to fill your bags early.
The strength and speed of the post-vaccination reopening of economies has caught many companies off guard. Having cut back sharply on orders when the world came to a halt in 2020, companies are struggling to get back up to speed. In addition, COVID continues to impact on production, leading to further disruption, delayed deliveries, depleted inventories and the risk of empty shelves as the festive season approaches. This is accompanied by higher prices for available goods. If goods are scarce, they will be more expensive. In addition, there is the rising cost of raw materials and transport, as companies also try to protect their margins.
Today, it is not just about transporting goods. The world is still struggling to produce enough. The zero covid policy in Asia has led to many months of factory closures in the region, impacting on global production - a situation that is still not resolved. Sickness and caring for relatives has also contributed to a shortage of workers, an effect exacerbated by generous support from governments that have not encouraged people to return to work. In addition to the shortage of goods, there are still difficulties in transporting them. The ports of Los Angeles have never had such a long line of ships waiting to unload, although this has been reduced in recent weeks. There is also a severe shortage of truck drivers to get the goods to their destination.
More encouraging are the indications that the end of the tunnel may be in sight. Many companies say the worst is over, and future forecasts announced at the third quarter results show more confidence for 2022. With the pace of vaccination accelerating further, the risks of closures are diminishing. In addition, with a reduction in fiscal support, the labour market should rebound further. GXO, the world's largest provider of logistics contracts, has announced that it is receiving more and more goods in its warehouses. Nike was able to reopen all its factories in Vietnam, which had been closed due to Covid this summer. Qualcomm announced that they were able to find enough components to maintain production, with an improvement in sight for 2022. In addition, the major US car manufacturers, Ford and GM, say that chip shortages are coming to an end. Finally, consumer demand is beginning to shift from goods to services, which would help reduce the imbalance between limited supply and booming demand.
The outlook is improving, but this may take some time. For the time being, the holiday season looks complicated... so get your orders in to Santa quickly.