A day doesn鈥檛 go by without some kind of news story about shortages and inflation brought on by supply chain problems.
Headlines about bare shelves in grocery stores, new cars and trucks in short supply and container ships anchored offshore waiting to be unloaded have been commonplace over the past few months.
Dr. Kim Whitehead, professor of quantitative management in the 91福利社 College of Business, shared her perspective on what鈥檚 been happening over the past year in supply chain.
Speaking with Dr. Whitehead as she unpacks what鈥檚 going on and how consumers are affected, it becomes quickly clear that this is a complex issue with lots of moving parts.
What are some of the factors leading to disruptions in the supply chain?
鈥淧eople are saying that the supply chain is broken; it鈥檚 not broken. There鈥檚 no quick fix like your car鈥檚 broken down and now you鈥檙e going to fix the engine and everything鈥檚 going to be better; It鈥檚 a whole domino effect.
A great part of what lies behind supply chain issues we hear about is due to global labor shortages. When we closed the world for COVID, we closed down the majority of workers in the world, except for essential workers. City workers were still working and to some extent transportation was still going, but not completely for moving people around the world. We closed down restaurants, theaters and manufacturing. Meat plants had to shut down because so many people were getting sick, then all of a sudden we had a meat shortage.
Really what鈥檚 led to this whole thing and what鈥檚 perpetuating it is lack of workers. We had a little bit of that in the United States and the world because the economy has been doing well, so even before COVID we had a desperate need for workers and an even more desperate need for skilled workers. What happened was, you sent a lot of workers home, and either they couldn鈥檛 come back or they didn鈥檛 want to come back. That hurt our warehouses, manufacturing and transportation. So all of these different pieces of the supply chain were really challenged by that and then when they could come back to work.
Now you can come back to work but you鈥檙e going to wear a mask or you鈥檙e going to be vaccinated鈥攁ll of these things happened and people start coming back to work. They still had other problems. They had personal problems they had to deal with鈥攎y kids’ schools closed, I can鈥檛 take my child to daycare because there are no day care workers.
I saw a statistic that 63 percent of workers that are not returning to the workforce are women. That鈥檚 a huge problem that affects our supply chain. We just don鈥檛 have enough people and now when they want to come back to work they may not be able to because of other constraints on them. It鈥檚 not that they don鈥檛 want to work, but they have those constraints so they鈥檙e not able to come back into the workforce, so we have this great labor shortage.鈥�
How has the transportation of goods and services been affected?
It costs so much right now to ship. That would be to ship over water or to ship over land. It鈥檚 getting very expensive because in order to get the workers, we have to pay so much more. To get a ship to come from China to here, we have to pay the additional cost of them hanging out outside the port of Los Angeles waiting to get in. So there鈥檚 all these additional costs to pay the employees.
Here鈥檚 an example: Twenty months ago you might have paid $3,500 for a shipment coming from China; that same shipment today will cost you $25,000. Shipping back to China might only cost you $1,900. So the costs have risen significantly. That鈥檚 one of the reasons we鈥檙e experiencing that in our economy where things cost so much more right now.
The grocery store is where most people are feeling this increase in prices, 30-40 percent. It鈥檚 not necessarily the food itself. You may have corn inside the can, but what about the can? Where do those materials come from? Where did the label come from? Where did the box come from that it was shipped in? All of these are different components that we don鈥檛 think about all the time.
What about the trucker shortage we hear about, and the truckers protesting in Canada?
When you make it harder for truck drivers to work, then you鈥檙e going to lose truck drivers. For example, right now we have all the protests about vaccinations and truck drivers and whether they can come across the Canadian border. We鈥檙e making it harder for them to do their work. We just recently had some laws passed in South Carolina that makes it harder for someone to get a Commercial Driver鈥檚 License. It鈥檚 interesting to me that in a time where we鈥檙e so desperate for people to do this job that鈥檚 not necessarily the most glamorous job and takes you away from home for a week at a time or more that we make it harder to qualify people to come and do it.
When people leave the workforce, they look at open positions that somebody else can backfill and if you鈥檝e been driving a long haul truck, and you鈥檝e been away from your home for three weeks out of the month, all of a sudden, now you can work in a manufacturing facility because that person left their job and be home every night. We change the dynamics of the workforce.
What do you say to people who think we have to make more goods in this country?
鈥淚t鈥檚 a global economy and I think God created the whole world, not just one country at a time. I think He intended for us to use the resources of the entire world that He鈥檚 given to us, and if we isolate ourselves I don鈥檛 think that鈥檚 in our best interest or does it meet a Christian worldview.鈥�
The New York Times recently declared that a normal supply chain in 2022 is unlikely. Do you see normalcy coming any time soon?
鈥淲e鈥檙e always in a process of evolution. As we get more technology, as we get more transparency in the supply chain, I don鈥檛 think there鈥檚 a normal and I don鈥檛 think we want a status quo. We want to keep progressing. We made a lot of progress in farm-to-table. A couple of years ago people were dying from Romaine lettuce. We鈥檝e learned ways now to trace that all the way to the farm where it came from. Before we couldn鈥檛 do that.鈥�
What are you telling your students about opportunities for them in the midst of supply chain problems?
鈥淚鈥檒l tell them some of the things that companies are doing to counter these problems.
They鈥檙e relying more on Artificial Intelligence (AI). They鈥檙e relying more on robotics. Where they didn鈥檛 necessarily make those capital investments before, now that they have fewer workers they don鈥檛 have a choice. They have to rely more on robotics, even within a warehouse. You can have robotic systems that move boxes from one place to another instead of a person on a forklift. You use these conveyor belts. Our warehouses are making more and more investments in that.
So, what I tell my students is 鈥榊ou have to be aware of that and you have to understand how that changes the dynamic of what takes place in distribution and transportation because we are making those changes; you鈥檝e got to understand that and be able to make business decisions around it and understand the technology.鈥� Those people that understand those things and can make those kinds of recommendations or can do those kinds of financial analysis鈥攖o determine that you can make that one or two million dollar investment鈥攖hose are the people you will need to come and work for you.
Another area is just being able to be flexible. As a manager, it鈥檚 being flexible and open to ideas and being creative and being able to problem-solve.
A lot of what we spend time on in our supply chain management program is really teaching students how to problem-solve. Not how to solve one particular kind of problem but really teaching them the skills and giving them the tools to problem-attack:
- Here鈥檚 my problem.
- Let鈥檚 define it.
- Let鈥檚 work together as a team.
- Let鈥檚 find different ways to attack it.
- What can we do to try to solve this problem on behalf of our organization?
We really try to teach them to be well-rounded decision makers. Supply chain in academia is considered to be a decision science, so we鈥檙e teaching them decision science tools and giving them the tools where they can make better decisions when they get out to the workforce.
Profitability is important, but so are people, right?
鈥淎s companies, sometimes we have to look beyond the competition but be looking out for the welfare of society as a whole; so if we鈥檙e in meat production and we need to get chicken out there to the public so that they eat, pinto beans or whatever it is that day鈥攚e need to be thinking about how can we have this collaborative ecosystem that creates a supply chain that鈥檚 as efficient as possible.
Sometimes those competitions create barriers, and those barriers affect the end consumer. The barriers affect whether or not we can buy toilet paper or paper towels. That鈥檚 a problem, so we want to work together toward the good of society. I don鈥檛 think we鈥檝e been as good at the social aspect. We look at the social aspect as much as we say 鈥榳e want to hire the right people and we don鈥檛 want to discriminate.
鈥淥ne of the things we haven鈥檛 done well is looking at 鈥榟ow our company affects society and how do we serve the greater good?鈥� How do we serve the public and their needs for clean water and not polluting the air and things like that, but how can we ensure they have the food they need? How do we ensure they have the day to day necessities they need?
That鈥檚 one of the things that we really try to teach our students, to have that type of well-rounded and global perspective.鈥�