By Jett Malkowski
COVID-19 has changed the supply and demand chain to a point where companies are unsure of what the actual demand is currently. This post will discuss what has caused these issues, what can and has been done legally about the issues, and how companies can potentially combat these international supply chain issues.
During various times of the pandemic, toilet paper and furniture were examples of items at an all-time high for demand.[1] More than ever companies are confused by consumer habits. Companies are all wondering where and when the next spike in demand of a seemingly random industry is going to occur. There are economists predicting a demand peak across the board in the near future.[2] However, there is an issue with companies ordering an excessive amount of goods: a backlog on the Eastern and Western ports of the United States.[3] There has been a lot of public outcries that this backlog is due to both the Trump and Biden administration executive orders aimed at prohibiting investments in Chinese companies.[4] However, it seems highly unlikely the executive orders are causing this backlog, but rather demand of goods continually rising within the United States and internationally.[5] The Biden administration is attempting to combat these supply chains issues, not exactly by creating new laws, but by offering government workers overtime, hiring more government officials to oversee the operations, and negotiating with port fulfillment companies to work more hours.[6] There is one problem with Biden’s plan, namely a shortage of labor force.[7] The Biden Administration has been giving people money throughout the pandemic, which has caused, to put it lightly, “allowing people to be more thoughtful about when and how” they go back to work.[8] There are many factors causing the supply shortage, one of them is Biden spending trillions of dollars on giving out free money throughout the pandemic.[9] Other reasons include a shut-down of many factories due to the pandemic causing a loss of inventory, an increase in demand, other countries’ COVID-19 policies, a number of truck drivers and warehouse workers retiring or quitting, and potentially other reasons that will become clearer as time passes.[10] Seemingly there is nothing the law can do to fix the international supply chain issues. However, this will not stop companies from bringing claims against each other for breach of contract, because goods are not being delivered on time.[11] China is one of the main culprits of where the COVID-19 shutdown of factories has caused much of this backlog.[12] Companies have mostly chosen two routes: the more common option is companies have moved manufacturing to other, less strict countries, while a second, less used option, has been doubling down on increased manufacturing in China.[13] The bottleneck has moved from international countries not manufacturing due to COVID-19 to a problem with the U.S. ports receiving goods.[14] Experts are estimating a wide variety of end dates for the supply chain backlogs with most estimating it will continue through the holiday season.[15] While demand is unknown, it is important for companies, both locally and internationally, to prepare for long wait times to receive goods and work proactively on combatting these potential issues to maximize revenues for the holiday season.
[1] Jen Wieczner, The Case of the Missing Toilet Paper: How the Coronavirus Exposed U.S. Supply Chain Flaws, Fortune (May 18, 2020, 7:30 AM), https://fortune.com/2020/05/18/toilet-paper-sales-surge-shortage-coronavirus-pandemic-supply-chain-cpg-panic-buying/; Richard Craver, Furniture Industry, High Point Market on the Rise Despite Pandemic, Winston-Salem J. (June 5, 2021), https://journalnow.com/business/local/furniture-industry-high-point-market-on-the-rise-despite-pandemic/article_e5f0a284-c4c3-11eb-ad31-4f59809adf01.html.
[2] Thomson Reuters, U.S. Toymaker Looks Beyond Port Logjams to the Risk of Gluts, U.S. News (Nov. 1, 2021), https://money.usnews.com/investing/news/articles/2021-11-01/us-toymaker-looks-beyond-port-logjams-to-the-risk-of-gluts.
[3] Id.
[4] Daniel Funke, Fact Check: Cargo Backlog Due to Supply Chain Snags, Not Executive Orders, USA Today (Oct. 27, 2021, 12:19 PM), https://www.usatoday.com/story/news/factcheck/2021/10/27/fact-check-ships-stuck-ports-arent-banned-business-us/6136622001/.
[5] Id.
[6] Franco Ordonez & Brian Naylor, There’s a Backlog at U.S. Ports. Here’s How Biden Hopes to Get You Your Goods, Faster, NPR (Oct. 13, 2021, 3:53 PM), https://www.npr.org/2021/10/13/1045501424/the-white-house-announces-steps-to-try-to-ease-backlogs-at-u-s-ports.
[7] Id.
[8] Id.
[9] Matthew Vann, What’s Causing America’s Massive Supply-Chain Disruptions, ABC News (Oct. 15, 2021, 12:10 PM), https://abcnews.go.com/Politics/whats-causing-americas-massive-supply-chain-disruptions/story?id=80587129.
[10] Id.
[11] Laura K. Veith, Litigation Minute: Legal Considerations for Supply Chain Disruptions, 305 The Nat’l L. Rev. 77 (2021) (analyzing potential claims and affirmative defenses arising from the supply chain issues).
[12] Thomson Reuters, U.S. Toymaker Looks Beyond Port Logjams to the Risk of Gluts, U.S. News (Nov. 1, 2021), https://money.usnews.com/investing/news/articles/2021-11-01/us-toymaker-looks-beyond-port-logjams-to-the-risk-of-gluts.
[13] Id.
[14] Id.
[15] Matthew Vann, What’s Causing America’s Massive Supply-Chain Disruptions, ABC News (Oct. 15, 2021, 12:10 PM), https://abcnews.go.com/Politics/whats-causing-americas-massive-supply-chain-disruptions/story?id=80587129.