The Global Supply Chain Domino Effect

It’s been a little bit since we updated you on the chip shortage. Since then, it has become abundantly clear it isn’t just a chip shortage, but a shortage of, well, everything! Because everything relies on technology and humans to keep the supply chain moving. We are continuing to see in real time just how interconnected and interdependent our world is.

First, to recap: What created the bottleneck we see in the auto industry? It began in the spring of 2020 when automakers laid off workers and shut down plants to save money when the world shut down and vehicle sales fell. While they were ordering less chips, the tech industry began ordering more. This accommodated for new purchases including televisions, appliances, home office and school equipment, work out equipment and gaming consoles. Then, when the world began to open back up, everyone was ready, stimulus checks in hand, to buy new vehicles to get back outside! But the auto industry wasn’t ready for that. They still aren’t! One missing chip can leave a car incomplete, despite utilizing hundreds.

Automakers still have unfinished cars sitting in their lots, awaiting chips. Every minute, they are losing $40,000. Tesla is learning how to pivot though. They’re constantly tweaking their designs to accommodate whatever chips they can get ahold of. It has led to record sales and a much larger market share, whether other automakers like it or not.

“…theses stops along the supply chain are slowing down at the very moment when Americans are demanding they work in overdrive.”

COVID-19 variants, factory fires, and unprecedented winters in Texas (shutting down chip factories temporarily) are among the many factors that prohibited the reignition of chip production. New factories are mid-construction in the US, but take years to create. Additionally, even with US-based factories, the industry remains so interconnected, that there would still be necessary involvement from other countries. Therefore, we will definitely see this shortage carry into mid-2023.

The dilemma the auto industry is in, is practically copy and pasted to everything else --kitchen appliances, phones, gaming consoles…in order to get the PS5 after its initial sell out, you had to be in a virtual lobby with a timer. Once the timer is up, they randomize everyone’s place in line to be let into the online store. Even if you’re let in or waiting patiently in the lobby, there’s no guarantee they'll have enough for everyone virtually present. One disheartening message can push your purchase back to the next restock, whenever that'll be.

In a similar fashion as Tesla and Playstation, companies are problem solving. In the IT support industry, SonicWall and Dell are using all the chips they can get ahold of in their premium models. On top of already being the highest-end option, they’re also raising the prices 50%, knowing the faster shipment time and availability will keep up purchases. Meanwhile, the low- and mid-range versions have indefinite shipment times or are simply unavailable. Currently, we're waiting a month for multiple computers our outsourced IT clients need!

What caused this across the board? Many things: stimulus checks prompting extra spending, the dependence on materials importing from or through East Asia (or elsewhere outside of the US!), a nationwide shortage of estimated 60,000 semi-truck drivers, the Delta variant, unemployment benefits keeping people from returning to work, etc. For example, without enough semi-truck drivers, cargo containers are sitting on the California coast, waiting for space on a truck to get distributed.

“This is the Everything Shortage—In short, supply chains depend on containers, ports, railroads, warehouses and trucks. Every stage of this international assembly line is breaking down in its own unique way. When the global supply chain works, it’s like a beautifully invisible system of dominoes clicking forward. Today’s omnishambles is a reminder that dominoes can fall backwards too,” says Derek Thompson with The Atlantic.

So what do we suggest? First, be patient. Second, stock up. This may seem bunker-esque to you, but it may well be mandatory. For the first time in our 30 years of small business IT support, we’re keeping extra Dell workstations and firewalls at our office.

When looking at the bigger picture, a few things are obvious: over-abundance in production needs to happen as quickly as possible, more goods need to be made in America, and we highly suggest IT support companies and clients stocking up to cover both computer repairs and new purchases! If you know of a maintenance issue or an incoming employee, tell your computer support provider know now! If you're a client, we will place the order(s) as soon as we know and keep you as update on the pending delivery date as we can!

headshot, owner, president, author, partners plus, IT company, IT services, SSD, recommendationBill Hogan is the Owner and President of Partners Plus. He has 40 years of experience in the technology industry, specifically IT support services. Bill has spoken at seminars all over the country about network management and published his latest book in 2018. Partners Plus was selected by PHL17 as the best Computer and Information Technology Support Company in the greater Philadelphia area in 2018.