Rines Angel Fund

Is it Time to Stock up on Supplies?

Insight from Garrison Gazvoda, originally published on October 26th, 2021.

The Covid-19 pandemic turned many stores into an early Black Friday experience. Customers hoarded common goods such as pasta, cleaning products, and toilet paper, leaving many aisles completely empty. This was initially shocking to most individuals, however many believed that the effects would only be short-term. In actuality, Covid-19 is still affecting the economy, and over a year later has played a major part in causing a global supply shortage.

It is evident that many factors are playing a role in this current shortage. Some of the key drivers include, the economy adjusting to post Covid lockdowns, climate change and regulations, and a shortage of employees such as truck drivers.

When Covid was at its peak, many stores and manufacturing plants had to bring their operations to a halt. When stores reopened, it created an immediate increase in the demand for goods and in turn a shortage of supplies. Lockdowns also caused an uptick in employee turnover and bankruptcy for small businesses. Supply chain bottlenecks, such as the shortage in microchips for cars, have risen due to this ongoing issue as well. CNN business claims that, “Border controls and mobility restrictions, unavailability of a global vaccine pass, and pent-up demand from being stuck at home have combined for a perfect storm where global production will be hampered because deliveries are not made in time, costs and prices will rise and GDP growth worldwide will not be as robust as a result,” (Egan). Overall, the lockdowns are a major contributor to the supply shortage due to a rise in prices and a decrease in supply.

Another key driver that influences supply is the emerging issue of climate change. Two sectors in the climate change industry (that are some of the greatest pollutants) are the transportation and agriculture industries. More than 70% of global transport emissions and 80% of the rise in GHG emissions since the 1970s can be attributed to road vehicles (WRI). Also, food prices have been increasing rapidly as supply chain disruptions, climate change, and Covid-19 effects arise. Climate change in the transportation industry can have a negative impact on roadways, vehicles, air transportation, and marine transportation. These effects reduce the supply of materials, goods, and services within this sector. In agriculture, the increase in extreme weather can drastically disturb food availability and reduce the productivity of farmers. Additionally, this can reduce the quality and accessibility of food while causing an increase in prices. Regulations from agencies such as the Environmental Protection Agency (EPA) aim to reduce the effects of climate change, however they are not able to single handedly reverse the outcome.

Turnover rates have also been a tremendous struggle for a plethora of companies. As stimulus payments increased and companies had to close their doors, many employees were either let go or quit because of unemployment benefits. There is now a significant staff shortage in a variety of industries which has led to a reduction in the amount of goods that can be produced. Companies have also been reluctant to increase their wages, in hopes that eventually employees will return; however some have started to give in and increase wages. It is difficult to know exactly when employees will return to work and how companies will survive until they do.

Going forward, there will be a need for more regulations to improve the supply chain framework and prevent bottlenecks. Although Covid, climate change, and the current turnover rate are all contributing to this challenge, each issue can be resolved in a unique way. Also, with more support and encouragement from companies and the government, employees will hopefully be able to return to work soon and have a desire to do so. This means that next time you go grocery shopping you should have more options to explore and no longer see the dust built up on the empty shelves.

Sources:

Bloomberg. “World Faces Growing Risk of Food Shortages Due to Climate Change.” SupplyChainBrain RSS, https://www.supplychainbrain.com/articles/33741-world-faces-growing-risk-of-food-shortages-due-to-climate-change.

Egan, Matt. “The Global Supply Chain Nightmare Is about to Get Worse.” CNN, Cable News Network, 13 Oct. 2021, https://www.cnn.com/2021/10/12/business/global-supply-chain-nightmare/index.html.

Olick, Diana. “Climate Change Will Disrupt Supply Chains Much More than Covid — Here’s How Businesses Can Prepare.” CNBC, CNBC, 19 Aug. 2021, https://www.cnbc.com/2021/08/19/climate-change-supply-chain-disruptions-how-to-prepare.html.

Wang, Shiying, and Mengpin Ge. “Everything You Need to Know about the FASTEST-GROWING Source of Global Emissions: Transport.” World Resources Institute, 16 Oct. 2019, www.wri.org/insights/everything-you-need-know-about-fastest-growing-source-global-emissions-transport.

Garrison is a senior from Cheshire, CT who is pursuing a dual major in finance and economics. He is also an active member of Alpha Kappa Psi and is a TA for Econ 402. This past summer he worked as a sales and marketing intern at Performance Architects in Boston, MA where he learned key sales and marketing strategies. He joined Rines Angel Fund in hopes of learning more about what it takes to become a successful entrepreneur and to gain insight about start ups and the process of angel investing.

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