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How COVID, weather and a worker shortage have led to the breakdown of the supply chain

OSU Research Matters is a bi-weekly look inside the work of Oklahoma State University faculty, staff and students.

Most likely, the last time you walked into the grocery store, you saw some empty shelves. But why are we experiencing such issues with the supply chain? In this episode, Meghan Robinson spoke with Ted Washington, a professor of supply chain management at Oklahoma State University's Spears School of Business. Washington has spent over 20 years in the supply chain industry, and he explains how COVID, weather and a worker shortage have led to the breakdown of the supply chain.

TRANSCRIPT:

ROBINSON: Why is the world currently facing supply chain issues?

WASHINGTON: The last couple of years, we have just had some very unique challenges, first starting with COVID, right. That really disrupted a lot of the manufacturing of our products. So now you're talking about a lot of our products not being manufactured because the manufacturing plants were closed. When you close those manufacturing plants, then you lead to slow-downs in the export from those countries to ours of products, which caused some backlogs and some delays.

In addition to that, when we have weather issues, right? We're almost a year to the day of that massive ice storm that came through Texas, Oklahoma, Arkansas, Memphis, and for the Memphis area, for example, that was the worst storm we have had in 120 years, which shut down operations.

And then the third major factor is shortage of people. We had a lot of people lose their jobs, right, because the lack of flow of product, and it took a while for them to come back. All of those things have negatively contributed to the supply chain and created a bit of a perfect storm that has really been challenging for us for the last couple years.

ROBINSON: What are the long-term effects of the supply chain issues that we're experiencing?

WASHINGTON: Increased prices. You think about it, long-term, how often do you see prices actually come down? Here's another impact of the supply chain challenge. We talk about a shortage of labor. In order to offset that shortage of labor, what we've done as an industry, is started to raise the prices. Which is a great thing, right? Some of the wages needed to be raised.

Well, now you're talking about raising wages and when you raise wages on a personal level, we don't want our salary to get reduced. We don't want our income to get reduced. So that increased labor costs remains. And as a result, there's justification for the increased price to remain.

ROBINSON: Is there a model or a projection on when we can expect things to get better?

WASHINGTON: I can think of at least three times that we have told ourselves kind of industry-wide that we were just a month or two away. I haven't been convinced any of those times. But I honestly don't think we're going to come out of this supply chain challenge for at least six more months.

There are three major things that I think we face that make it difficult for me to see the end in the near future. One: we have not, either here in the U.S. nor globally, gotten a handle on COVID. That by itself can single-handedly shut everything down.

Number two, we don't control the weather. We're having bigger, more devastating storms, droughts, fires, things of that nature. And when they hit a part of the country or a part of the world, it impacts the supply chain. And then last but not least, specifically here in the U.S. a labor shortage. We got to get people back to work.

In my mind, it's going to take another six months or so before, minimum, before we get those things kind of flushed through.

ROBINSON: For OSU Research Matters, I’m Meghan Robinson.

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