New COVID Lockdowns In China Guarantee More Supply Chain Issues

Over a year ago, the world experienced massive delays, material shortages, port shutdowns, and canal blockages, which had a drastic impact on holiday season shopping. For brick-and-mortar stores, shelves were sparse and companies couldn’t seem to keep items in stock. When it came to online shopping, the length of time between the order placement and the product delivery was extended with each purchase.

Fortunately, large corporations came up with their own solutions, purchasing shipping containers and mapping out separate routes to avoid blockages and ensure on-time deliveries. Then, as we entered the New Year, the supply chain crisis had seemingly quieted down. But now, nearing the mid-mark of 2022, new threats are on the rise which could pose bigger threats than before.

Port of Shanghai Experiences an Increase In Disruption

As China continues its battle against Omicron, shops, and factories are struggling to stay afloat. According to a recent report from Reuters, more than 350 million people have been affected by China’s new wave of lockdowns, which accounts for approximately 40% of the country’s gross domestic product.

And as Chinese President Xi Jinping further enforces the country’s zero-COVID policy, global supply chains are expected to suffer, as well. The Port of Shanghai, the world’s largest port, has remained open, but with reduced operations to 70% capacity, truck drivers and port staff can’t keep up. 

Slower cargo unloading times and pile-ups of shipping containers along the ports could lead to “the most significant logistics disruption since the start of the pandemic,” shipping company Freightos said in a recent update.

Western-Hemisphere Ports Face High-Level Traffic as a Result

Ports in Los Angeles and Long Beach, the two largest ports in the Western Hemisphere, are experiencing oceanic traffic jams with excess cargo. According to MSN, over 100 ships were jammed along the West Coast last fall. Since then, those numbers have gone down, but new blockages threaten to spike traffic levels to what they were before the pandemic. 

Whether these Western ports will return to the 100-ship jam remains to be seen, but experts say that risk is a likely possibility. To prevent such a high-level blockage, The ports would need to move existing cargo out — and that’s no easy task. 

“Moving cargo has been a challenge, as the land around the port is filled with empty shipping containers that need to be returned to China,” Tori Richards, writer for MSN, explains. “Fewer containers have been going out than coming in.”

The additional COVID-19 outbreak in China has put a damper on the strength of operations. With over 25% of U.S cargo coming from China, warehouses and factories haven’t been able to operate at full capacity. As dozens of affected Chinese cities have been sealed off from the rest of the world, the manufacturing rate has significantly reduced. 

These factors are already weighing heavily on large retailers, like Amazon and Walmart, who have already begun ordering holiday shipments in an effort to avoid a crisis similar to last fall. 

War In Ukraine Adds to Existing Supply Chain Issues

While it’s clear that the effects of the pandemic still loom over us, new world events only add to the continuing crisis. The outbreak of war in Ukraine has thrown the world into a loop. As the largest conflict in Europe since World War II, the Russian invasion of Ukraine has had global impacts — particularly in the area of e-commerce. 

In February, Russia began its invasion of Ukraine. The U.S responded by establishing economic sanctions, or “penalties imposed by one country on another, to stop it acting aggressively or breaking international law,” according to BBC. 

Furthermore, the US extended its retort by banning dual-use goods and all gas and oil imports from Russia. Russia, in return, banned the export of more than 200 products to the Western Hemisphere.  

These sanctions and restrictions have already set off a disturbance in the supply chain. BBC continues to state that nearly 300,000 U.S companies’ supply chains are reliant on imports of some kind from Russia or Ukraine. Naturally, this forces the U.S to hunt for sources from elsewhere and attain new trade deals. 

But as history tells us, deals aren’t made in a day. These decisions will result in extended time between the initiations and completion of production processes, which only leads to increased shipping and operating costs.

As far as how this affects operations in China, Yawen Chen, writer for Reuters, explains, “With the war in Ukraine pushing up commodities costs, and demand for Chinese exports cooling as inflation spikes in key overseas markets, premier Li Keqiang this week warned of ‘unexpected changes’ in the external and domestic environment that would require more urgent aggressive measures.”

Companies Fortify Themselves for More Supply Chain Troubles

The effects of new widespread lockdowns in China are already being felt in Europe and the U.S. European government officials are already revising their policies, and companies are being forced to reevaluate their supply chain management systems just as they did last year.

While it’s difficult to prepare for times of crisis, e-commerce businesses already experienced similar risks back in 2020 and 2021. Using their knowledge from last year’s supply chain woes, many companies look to local sourcing to reduce transport costs and shipping times; others are building up and diversifying their inventory to prevent the disruption of stockpiling, which experts say is likely to happen.

Utilizing technologies that offer up-to-date market data and risk evaluation resources is also encouraged, as these tools enable companies to stay ahead of any changes happening around the world, and how that might affect their business. As the world enters yet another period of uncertainty, companies can get ahead and prepare early to prevent supply chain issues from cutting into their operations.