By Michael Okrent
Shortages of basic goods still plague the U.S. economy—2½ years after the pandemic’s onset turned global supply chains upside down.
Want a new car? You may have to wait as long as six months, depending on the model you order. Looking for a spicy condiment? Supplies of Sriracha hot sauce have been running dangerously low . And if you feed your cat or dog dry pet food, expect empty shelves or elevated prices.
More on inflation: Fed’s Williams sees steep decline in inflation ahead
These aren’t isolated products. Baby formula , wine and spirits , lawn chairs , garage doors , butter , cream cheese , breakfast cereal and many more items have also been facing shortages in the U.S. during 2022—and popcorn and tomatoes are expected to be in short supply soon.
In fact, global supply chains have been under the most strain in at least a quarter-century, and have been pretty much ever since the COVID-19 pandemic began.
I have been i m mersed in supply chain management for over 35 years, both as a manager and consultant in the private sector and as an adjunct professor at Colorado State University — Global Campus.
While each product experiencing a shortage has its own story as to what went wrong, at the root of most is a concept people in my field call the “bullwhip effect.”
What is the ‘bullwhip effect’?
The term bullwhip effect was coined in 1961 by MIT computer scientist Jay Forrester in his seminal book “Industrial Dynamics.” It describes what happens when fluctuations in demand reverberate and amplify throughout the supply chain, leading to worsening problems and shortages.
Imagine the physics of cracking a whip . It starts with a small flick of the wrist, but the whip’s wave patterns grow exponentially in a chain reaction, leading to the tip, a snap—and a sharp pain for anyone on the receiving end.
The same thing can happen in supply chains when orders for a product from a retailer, say, go up or down by some amount and that gets amplified by wholesalers, distributors and raw material suppliers.
The onset of the COVID-19 pandemic, which led to lengthy lockdowns, massive unemployment and a whole host of other effects that messed up global supply chains, essentially supercharged the bullwhip’s snap .
Cars and chips
The supply of autos is one such example.
New as well as used vehicles have been in short supply throughout the pandemic, at times forcing consumers to wait as long as a year for the most popular models.
In early 2020, when the pandemic put most Americans in lockdown, car makers began to anticipate a fall in demand , so they significantly scaled back production. This sent a signal to suppliers, especially of computer chips, that they would need to find different buyers for their products.
Computer chips aren’t one size fits all; they are designed differently depending on their end use. So chip makers began making fewer chips intended for use in cars and trucks and more for computers and smart refrigerators.
