Beyond Your Latte: Supply Chain Shortages Plague Numerous Industries

If you are craving an iced brown sugar oat milk shaken espresso from Starbucks, you may need to wait. Supply shortages, including cups, coffee syrup, cake pops, oat milk and coffee stoppers are affecting certain locations. Likewise, Chick-fil-A also reported a shortage of sauces in May in some markets and supposedly asked employees to ration supplies. The timing couldn’t be worse for restaurants and cafes as food and beverage sales are increasing after a pandemic-fuel decline.

Supply shortages are not limited to one industry. Cars, bikes, electronics, fitness equipment, and even houses are in short supply in various markets around the globe. Numerous factors have caused material shortages, including factory closures to prevent the spread of the virus, congested shipping routes and unpredictable consumer demand.

So, what’s causing these shortages?

Everything from raw materials to a global microchip shortage is crippling many companies’ production and distribution. Supply chain deficiencies are limiting economic activity and growth by extending lead times and boosting material and transportation costs. Ultimately, these supply bottlenecks are causing goods to become more expensive. This could last a while; Goldman Sachs doesn’t expect these supply chain supply woes to ease until early 2022.

According to the New York Times, this crisis is due in part to the widespread use of lean manufacturing, an approach that discourages the stockpiling of materials to boost efficiency. Under lean manufacturing, plants stock just the right amount of materials and parts, allowing the company to be agile in the face of market changes. Toyota helped revolutionize the auto manufacturing industry by employing lean manufacturing but this also relies on materials and components being readily available. Add a global pandemic into the equation and this lean approach creates shortages.

Supply chain issues are also due in part to the rising demand for goods. “The success of our vaccination campaign surprised many people, and so they weren’t prepared for demand to rebound,” said Sameera Fazili, a deputy director of the White House National Economic Council, said at a recent news briefing.

Business agility no longer a buzzword; it’s the new reality

In the face of supply shortages, businesses need to maintain consumer trust while finding solutions. Starbucks says it is using technology to help gauge expectations. Its app states which products are available, so consumers know in advance if a shortage may limit the availability of their favorite items. Also, Starbucks is temporarily halting the production of some lower-selling items to focus on higher-sales ones.

The restaurant industry is also facing a labor shortage, making it increasingly difficult to attract new employees. This shortage is exacerbated by the opening of indoor dining and lifting capacity limits in some areas, requiring a larger staff. To respond, many restaurants are offering perks for new employees, such as retention bonuses and referral fees.

Is a governmental response to the supply chain problem enough?

The Biden administration recently completed a review of supply chains and created a 250-page report finding that shortages are a threat to national security and economic stability. The White House also recently launched a task force to address the supply chain issues found in the semiconductor, agriculture, construction and transportation sectors.

The administration’s plan seeks to mitigate supply shortages by using the might of the federal government. Some of the action items include the Energy Department releasing blueprints for lithium batteries to help shift the U.S. to electric vehicles. The Department of Health and Human Services will use the Defense Production Act for a public-private partnership in manufacturing essential pharmaceutical drugs. The Interior Department plans to determine where critical minerals can be mined and processed. Meanwhile, the Commerce Department intends to boost cooperation and investments in the semiconductor industry.

“Our approach to supply chain resilience needs to look forward to emerging threats from cybersecurity to climate issues,” added Fazili. “And so, we are future-proofing.”

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