Global Supply Chain Challenges in 2021

According to industry experts, the problems that the global supply chain will face in 2021 are shaping up to be the most difficult that suppliers have ever faced in a generation. Lack of labor and raw material availability, transportation challenges, COVID-19 interruptions, and even natural disasters have combined to create a dangerous trading environment. In addition, as supply continues to lag behind demand, the cost of commodities continues to soar, forcing corporations into the position of responding to a revolving door of price hikes in their supply chain.

As media outlets alert customers to the impact that global supply chain concerns will have on their online holiday shopping, this is swiftly becoming a topic of conversation around the dinner table. 2021 will be the year of purchasing in advance and waiting impatiently for the Amazon truck to arrive. If you've already requested or shared a gift list in order to be ahead of the holiday supply chain bottlenecks, you'll understand exactly what we're talking about here.

It's likely, tho, that if you're reading this post, you've also been affected by the issues affecting our global supply chain at your place of employment. As a packaging materials supplier, we've seen monthly price hikes for our materials as our suppliers grapple with the realities of a global supply system that has been subjected to a number of shocks at the same time.

Consequences of Labor Scarcity

Bill Conerly, the Senior Contributor at Orbes, believes that a manpower shortage will be the most significant source of supply chain disruptions in 2021, surpassing transportation bottlenecks and delays. According to his article, "The Labor Shortage Is the Root Cause of Supply Chain Disruption," labor shortages are common across the supply chain, affecting everyone from manufacturing and warehouse workers to truck drivers to local delivery people and retail employees.

According to a survey performed by the United States Chamber of Commerce in May of 2021, 90 percent of business owners identified a "lack of accessible workers" as the primary reason for the stagnation of local economies.

Shortages of Raw Materials

Unfortunately, labor is simply one of the numerous scarce resources. Due to lockdowns, force majeure, and abnormally high demand from the United States and China, raw material availability has been drastically reduced.

As a result, the supply chain for 2021 will have to deal with shortages of even the most basic raw materials, such as wood, plastic, and chemicals. Not only is this market badly depleted and backlogged, but the supplies that are available are significantly more expensive than in the past.

Current supply chain constraints are contributing to commodity price inflation, as businesses fight for a finite supply of raw materials.

Difficulties in transportation

Unfortunately, supply chain difficulties do not end with raw material and labor shortages. Transporting goods and resources has devolved into a slog, exacerbated by rising shipping and freight prices, international port congestion, and a driver shortage.

While some of these supply chain challenges can be traced back to the Suez Canal blockade, others, such as the cardboard bottleneck, are partially consumers' fault.

As Mark Sutton, CEO of cardboard box manufacturer International Paper, reassures us, "there are no cardboard shortages at the moment, but the supply chain is extremely stretched."

Two players are involved in this stretch. ' Consumers and their pandemic-induced online shopping boom are at one end of the tug-of-war. On the other hand, there are challenges, like harsh weather and labor shortages. Supply networks are effectively caught in the crossfire, struggling to match consumer wants and expectations amidst massive hurdles.

2020's Legacy

Certain worldwide supply chain issues in 2021 are residuals from the 2020 disruptions. In 2020, the supply chain faced harsh weather conditions that resulted in extensive plant closures, the infamous Suez Canal blockade, strained international relations, and COVID-19-related labor shortages.

These occurrences resulted in significant capacity reductions and 'traffic jams.' As a result, shipping and commerce will continue to be sluggish and unreliable.

?The Plastics Industry in 2020

As distributors of packaging products, we watched with keen interest and worry the ups and downs of the plastics supply chain. Readers interested in delving deeper into 2020's impact on plastic resin pricing can do so in our post, but for a more concise overview of how 2020 mistreated our business, continue reading here.

Hurricane Laura devastated the petrochemical industry in the summer of 2020, wiping out over 15% of the industry's PP and PE production.

Then, on March 23, a container ship grounded in the Suez Canal, affecting a slew of global sectors, including plastics.

Additionally, the plastics industry had to contend with perilous international trading conditions. The recent increase in transportation rates from Asia harmed import arbitrage prospects, resulting in a decrease in the amount of plastic material entering the United States. Additionally, resin shipments to Latin America strained the already-scarce US inventory. To make matters worse, trade between the EU and the UK has stalled due to port congestion caused by Brexit. These bureaucratic bottlenecks resulted in major delays in the shipment of polyethylene, polypropylene, and polystyrene to the United States.

Certain supply chain difficulties identified for 2021 were also evident in 2020, including a severe labor shortage. A labor shortage drastically reduced production capacity, resulting in a scarcity of PE and PP inventory for the 2020 plastics sector.

These obstacles inevitably resulted in price rises, most notably for resin, polypropylene (PP), polyethylene (PE), and polyvinyl chloride (PVC).

While earlier forecasts indicated that recovery would take at least a year, various plastics prices plateaued in August and September of 2021. While we'd like to believe that the plastics sector has back to normal, we have to admit that each day when we open our inboxes, we suffer from a mild case of "plastics PTSD." As with our consumers, we're hoping to avoid learning of another supply chain price rise.

Plastics Industry Labor Shortages

Prior to the pandemic, employment in the plastics business was increasing. It employed 1.5 million people in 2019, following a 1.6 percent gain in employment during the preceding seven years, significantly more than the 1% average increase in manufacturing in the United States.

While the plastics industry remained operational during the pandemic, jobs were lost as the economy collapsed. As a result of the pandemic's aftermath, the industrial industry is experiencing a labor shortage, with somewhat dim recruiting estimates for the remainder of 2021.

The primary disadvantage of labor shortages in the plastics industry is lower manufacturing capacity, which is exacerbated by increased demand from the healthcare and consumer goods industries.?

Insufficiency of raw materials in the plastics industry

Another issue confronting the plastics sector is the global supply chain's raw material deficit.

Plastics such as polyethylene and polyurethane were 35 percent and 50% more expensive in the summer of 2021, respectively. These shortages were brought about by lockdowns, force majeure, and excessive demand from the United States and China.

Seventy-one percent of plastics manufacturing companies reported insufficient supplies of raw ingredients during the first six months of 2021.

The plastics industry's widespread shortage of raw materials has resulted in packaging bottlenecks, extended delivery delays, and reduced profit margins.

What can customers and suppliers of packaging do?

Cost-cutting measures and innovations have become critical in response to raw material shortages. With knowledge of barrier qualities, shelf life, and product safety, our team assists customers in selecting packaging that meets their needs while mitigating the impact of price increases.

We are making every effort to communicate in a proactive manner and to think creatively. This time, for us, it is not about reaping the benefits of short-term inflation. Not at all. It's about providing excellent customer service, sustaining long-term connections, and being innovative where possible.

We recently posted a video in our piece on rising resin prices about how businesses with plastic packaging needs can manage supply chain disruptions without going insane. We'll continue to share solutions and insights with our clients as we learn more. We are convinced that supply chain difficulties will eventually be resolved. The year 2021 has been challenging, but as vaccines and boosters are distributed and unemployment benefits are reduced, we are confident that a resurgent labor force will gradually unravel the supply chain bottlenecks.