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"Supply Chain Crisis Threatens To Trigger Massive Bankruptcies:
Six Months Until Businesses Fail"
by Epic Economist
There’s nothing normal about the “new normal”. The survival of hundreds of thousands of American businesses is on the line as the supply chain crisis impacts their operations while a series of other problems, including staffing shortages and the new wave of virus cases, are crushing expectations of a sustained recovery. Many Americans are just now realizing that empty shelves are going to stay with us for a while. We’re witnessing shortages of electronics, appliances, clothing, vehicles, and even food. Empty shelves are sweeping across the nation as grocers struggle to get their goods delivered. At the same time, everything is getting more expensive, and if we think the latest price hikes are simply absurd, for business owners, who have been absorbing most of those increased costs, profit margins are so low right now, many of them are nearing bankruptcy.
Supply chain disruptions are happening in every corner of the industry, and this is pushing the cost of manufacturing, shipping, transportation, and labor to extraordinary levels. Even worse, industry executives are saying that these bottlenecks aren’t likely to be resolved until 2023. While shortages have a major impact on the lives of consumers, businesses, big and small, are withstanding the worst of the disruptions. Sectors such as hospitality – and especially restaurants, which run on narrow profit margins, – are having to cope with a sizable collapse in revenue due to higher operating costs.
There’s essentially no way around it: if companies want to get their goods, they have to pay these insanely high rates. According to the Drewry World Container Index, the rate to move a 40-foot container from Rotterdam to New York faced a US$6,214 increase this month and has jumped 208 percent compared to the same time last year. The Shanghai-Long Beach route has seen an even sharper increase, going up an additional US$13,500 this month, and 283 percent from last year. Prices are also climbing because the annual pace of inflation hit over 7 percent last month, the largest gain in the consumer price index recorded in nearly four decades.
Food shortages are also driving prices to surge, with meat, bacon, and poultry rising almost 30 percent. For restaurant owners, this has been a total nightmare. A new poll conducted by Alignable found that approximately 3.1 million businesses in the U.S. have been severely hurt by supply chain issues. From those, at least 498,000 small businesses will not be able to stay open for six more months if revenue continues to go down. The poll shows that the emergence of a new virus variant in January has caused a 43% to 31% revenue loss for U.S. small businesses. The new restrictions contributed to the aggravation of supply chain backlogs, labor issues, and inflation, it noted.
While our leaders insist that the breakdown of our supply chains is “temporary”, and it will fade away eventually, economic analysts David Dayen and Rakeen Mabud noted that “almost none of these stories will explain how these shortages and price hikes were also brought to life through bad public policy coupled with decades of corporate greed.” Unfortunately, more turbulence is on the horizon because thousands of truck drivers went on a strike this week complaining about movement restrictions, poor working conditions, and low pay. George Sofianos, who runs a distribution business says that "disaster might be the right word in terms of staff shortages". The United States is experiencing a shortage of more than 80,000 truck drivers, according to the American Trucking Associations. And at least 40,000 truckers are threatening to quit their jobs if conditions do not improve.
Given that about 72% of America’s freight transport moves by trucks – from the vegetables we put on our dinner table to the gas pump in our vehicles – this situation is “more critical than ever,” Sofianos added. It’s safe to say that struggling businesses will be the hardest hit by the truck drivers’ strike. Every day of delay is a day of lost revenue business owners will never make it up, They can always try, but they never do, Sofianos continued. The pain never ends. The instability of our supply chains will continue to breed vulnerability for consumers, for workers, for businesses, and for our economy. We’re in the middle of a very complex crisis that is threatening our entire system like never before. The outlook isn’t very reassuring. As supply chain problems compound, we could potentially be on the verge of another massive wave of bankruptcies and lay-offs. But many of us don’t even realize the perfect storm that seems to be forming to take us back to a nightmarish economic scenario."
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