The chip that stole Christmas

The world financial system may have survived the pandemic but, like many victims of the actual virus, it is now displaying signs of economic Long Covid.

The immediate economic effect of the Covid-19 pandemic was clear – a global shutdown, closed borders, and silent cities.

As world trade and travel resumes we discover that the world financial system may have survived but, like many victims of the actual virus, it is now displaying signs of economic Long Covid.

Despite the post-Covid restart, our interconnected, digital-driven, global e-commerce network and the sophisticated supply chain that supports it is buckling.

We have come to take it for granted that we could buy anything we wanted, whenever we wanted, at ridiculously cheap prices. We could order anything online and it would be shipped overnight direct to our door. More recently, we have become used to same-day delivery, even 10-minute delivery.

Suddenly, the system isn’t working.

Parents are concerned that the Christmas toys they want to buy their kids will not make it to the shelves on time. Small businesses are floundering as their supplies float listlessly in back-up container ships off the Port of Los Angeles, or are stuck among canyons of containers in the dockyard waiting to be unloaded. Electricity and gas prices are soaring. Car manufacturing plants are closing down because they cannot get the silicon chips they need to finish building new automobiles.

Why is it happening, and how can we fix it?

The first shock came at the start of 2020, when the coronavirus pandemic shut down large swaths of the world economy. Demand plummeted. This year, consumption came roaring back with a force unseen in modern economics, threatening to drive inflation to levels reminiscent of the dark days of the 1970s.

Economic fibrillation

While an elevated logistical heart rate can be a sign of a healthy economy, too much activity can trigger economic fibrillation. Even before a supertanker got stuck in the Suez Canal it was clear that the arteries of world trade were in danger of become blocked.

The problem was exacerbated by a trade war between the US and China, resulting in a semiconductor shortage that struck at the heart of consumer goods manufacturing.

Meanwhile, measures introduced to weather the pandemic were found to have some unforeseen side-effects. Millions quit their jobs in the “Great Resignation” after months of being paid to stay home. Truck drivers and taxi drivers resigned en masse, leaving people and goods unable to reach their destinations.

The just-in-time supply chain proved to be as strong as its weakest link, which was shattered by out of date logistics and international power politics.

The digital transformation of worldwide trade is long overdue and is our next big challenge. That is why OurCrowd is investing in companies taking logistics to the next level. Startups like Freightos are rescuing freight forwarding from a steam-era morass of clipboards and carbon paper. Companies like IntellAct are applying artificial intelligence to transport hubs to cut bottlenecks and reduce turnaround times for aircraft and logistical vehicles. Remote transport operators like Phantom Auto are able to operate forklifts and other warehouse vehicles 24/7 to eliminate the inefficiencies created by short working hours at major ports.

More work needs to be done. Customs clearance, compliance, cross-border payments, shipping and transportation need to be digitized so that our logistics can enter the modern era.

The chips may have stolen this Christmas, but help is on its way.