Empty grocery shelves and rising prices blamed on 20 months of pandemic disruptions have come as little surprise to Christopher S. Tang, faculty director of the Center for Global Management at the UCLA Anderson School of Management. He saw similar, if briefer, problems in the wake of both 9/11 and the 2011 Fukushima earthquake.
Under normal circumstances, the supply system would start to recover after the winter holiday demand, if COVID-19 vaccination rates kept ticking up. But now, Tang fears, with labor shortages, issues with supply chains will extend deep into 2022, or even further.
The nation’s distribution system was stressed before COVID-19, he says, by a generational scarcity of truck drivers, as companies bet on the debut of automated vehicles to replace them. That has not happened. Meanwhile, key ports such as the Port of Los Angeles have shied away from political confrontations that would accompany any move to automate docks with technology that’s considered standard in many Asian ports. Today, food rots and fast fashions fall out of style in U.S. ports. Widgets vital for retooling factories are stranded. A failure to invest in the small things is calamitously affecting the big things.
The “just in time” philosophy of lean inventory, dating back to Toyota in the 1930s, depends on stable, “frictionless” trade — the pandemic and politics have undone that. Tang points to an October tussle in which China temporarily banned Australian coal. Chinese manufacturers had to turn off factory lights for days, creating new chokepoints in the production of home improvement materials during high demand in the U.S.
In the midterm, promised infrastructure spending will help. But, Tang says, in the long term, “we need a North American industrial plan — including Canada and Mexico — to identify regional sources of essentials and reduce our exposure to global turmoil. In the 1980s, we had 33 semiconductor companies. Now, we have three.”
And we need smarter tech, potentially developed in partnership with universities that created the internet and semiconductors. Such efficiencies could generate higher wages to balance out steeper consumer prices. The bad news? Tang suspects that recent price hikes are here to stay.
Read more from UCLA Magazine's January 2022 issue.
