Whats driving all of the shortages in the pandemic?
Supply chain shortages have become a common sight over the past year as businesses were hit with sudden shifts in consumer demand, global production disruptions, and shipping delays during the pandemic. Everything from toilet paper to semiconductor chips have been affected, and some businesses are looking to adapt their business models to include more flexibility, rather than prioritizing cost and efficiency. Many companies rely on just-in-time systems, which involve having companies receive goods only as them need them for the production process, which reduces inventory costs. But as companies shift away from just-in-time models, inventories have been growing. In April 2021, manufacturers and trade inventories were up 1.3%, compared to the year before, according to the U.S. Census Bureau. We have a really fragile global supply chain that had been overly leaned out, said Dr. Nada Sanders, distinguished professor of supply chain management at Northeastern University in Boston. Things are going to change, but its going to take a long time.  She spoke to Marketplace host Kai Ryssdal about the factors driving supply chain shortages. The following is an edited transcript of their conversation. Kai Ryssdal: Yeah, and thats where we find ourselves today, right, with the chips and the pharma. We all looked at  we, you know, regular consumers  went to the store, there was no toilet paper, and we consulted supply chain experts. Sanders: Exactly. And coming into the pandemic, our supply chains globally had become enormously complex, we also have relied on something called lean, or just-in-time inventory systems. That really means no, or very little inventory in the pipeline, and Im telling you, were going to see a restructuring of supply chains. And were already seeing companies that are talking about bringing a lot of it back home, vertical integration. But bottom line is that we have a really fragile global supply chain that had been overly leaned out, things are going to change, but its going to take a long time. Ryssdal: The reason, ostensibly, that those supply chains got so long and so complicated, and so just-in-time oriented, was to provide goods to consumers at the lowest cost to companies, obviously, but then consumers dont have to pay higher prices. Sanders: Absolutely. What companies are doing is moving from a just-in-time to, you know, you might have heard some people call it a just-in-case. It is going to mean fewer choices, higher prices, longer lead times. Dr. Nada Sanders (Courtesy of Dr. Nada Sanders)  Ryssdal: Do you anticipate  and look, none of this is going to happen fast, right, thats the caveat. I mean, things are looking really promising now, life is good, people are happy, theyre spending money, economys growing. Sanders: I think that we really havent repopulated those supply chains. They havent been restructured, and it takes time. And I really worry, I mean, look at the cyber attacks. Any disruption that could happen puts us in a really vulnerable position. And also, we are so globally connected, and we look at countries like India, that is the primary source of generic drugs. So what could happen is we have ill workers, as we, you know, have a slowdown in that production. Its kind of frightening. Ryssdal: Alright, so just as a way to wrap this up, let me let me take you back to where we started. As we sit here in the in the midsummer-ish of 2021. Sanders: The toilet paper of this year is definitely the semiconductors. The other issue, I think is really important, is whats going on with the labor markets. I think we are seeing some really dramatic shifts in terms of skill sets that are being required, wages. We are moving back into very much a service sector economy, but we dont have enough service workers.