The COVID-19 pandemic tipped off supply chain issues that may take years to reconcile. Due to virus disruptions, global systems that seemed fine for years quickly proved untenable as operations deteriorated. Now, employers are left wondering how they might be able to stay afloat amid unprecedented market uncertainty. This article outlines key factors contributing to the current crisis and explores the impact of rising inflation on employers.
Market Overview
When the COVID-19 pandemic first began, business leaders assumed the economy was coming to a halt. As such, manufacturing workers were laid off, and orders were greatly reduced. Many businesses followed suit—computer chip companies lowered output, and shipping organizations reduced service.
While this seemed worthwhile initially, these moves ultimately proved miscalculated and helped contribute to the current market situation. In fact, according to Bloomberg News, spending by consumers in major cities was up more than 15% in December 2021 compared to two years prior. This is because, despite economic withdrawals in the service sector, industries such as technology and home leisure surged during the pandemic. In other words, instead of going out, Americans were staying in and spending money on things they could use at home.
Supply Chain Design Flaws
A major factor contributing to today’s market issues is how supply chain and warehousing models are currently set up. In recent years, due to global connectivity, the world has heavily relied on “just-in-time” (JIT) supply models. These models focus on receiving orders precisely when needed to reduce storage costs for inventory and help increase product turnover.
However, when the JIT model’s precision is disrupted anywhere, the entire system slows down, putting it at risk. During the pandemic, this occurred on a massive scale across virtually every industry.
With challenges creating and shipping goods lingering on today, there is currently more demand than supply. In turn, inflation is soaring and prices are rising at the fastest pace since 1982, according to the New York Times.
Workplace Impact
Employers are concerned about the current market situation. Supply chain disruptions and rising costs rarely lead to beneficial outcomes for anyone. Employers are seeing the confluence of these factors within their own workplaces, with top issues including:
- Difficulties attracting and retaining workers
- Struggles with offering competitive compensation amid high inflation
For more tips on dealing with the uncertainty of supply chain issues and the impact of inflation on employers, check out this article on the TIG Blog.
