For several months, there has been a global supply crisis caused by transport problems, the rise in the price of raw materials and energy or the lack of essential components such as microchips. All this is bringing with it a very complex situation in which several factors enter. What will be the consequences? What sectors are the most affected? What is the foreseeable future? Jordi Damià, professor of strategy at EADA Business School and CEO of Setesca, analyze the current scenario.
Better to order the toys now, as they will run out
Immersed in one of the most critical seasons as far as consumption is concerned, in the middle of the pre-Christmas season the business fabric is in one of the greatest supply crises in recent years. As Jordi Damià highlights “There are companies that have lost all the accumulated profit of the year due to the rise in energy and raw materials.”
It has even reached the extreme of companies that consume materials such as steel, paper or electricity that have decided to stop their production, since they are losing money producing. This crisis is affecting all those companies that generate “Product of mass consumption (technology, paper, steel, copper, cement, etc. …) and whose production is centralized in Asia”. For this reason, we are talking about the problem that may have this year with toys. In this case, the expert points out “we would have to be proactive and order them as soon as possible, since they will run out and, not only that, they will rise in price as they become scarce.”
It affects all companies equally
This situation is affecting all companies equally, regardless of their size. It is rather a problem of the type of product that is used. Although it is true that the small ones tend to work with smaller margins, so they have less capacity to absorb that extra cost on their side and suffer more.
The causes of this crisis can be found, according to the professor, in the recovery of consumption after the pandemic and in the stimuli offered by different countries and central banks to recover the economy. The other great cause is that three major economic areas have been created in the world de facto (China and the satellite countries, the United States, the United Kingdom, Australia and New Zealand, and Europe) and the Asian bloc. The Chinese area is where production has been concentrated for years and is currently prioritizing its own markets over those of its competitors.
What is the remedy?
“The smart thing would be to look for alternative local products so that each country or economic zone does not depend on others in its production “, Damià sentence to which he adds “It is evident that it is of a strategic risk. Some countries have already taken measures to relocate their strategic production models ”. The latter, in the short term, is complex. For this reason, what is really being done is to increase production to the maximum to try to meet demand.
On the other hand, both the production companies and the logistics companies affected should start different production models and therefore different business strategies.
The future
As Jordi Damià argues, the geostrategic areas indicated above will be self-sufficient in energy and in the production of strategic products. In the same way, “the combination of climate change plus the strategic risk we are experiencing should lead to new products, new forms of production and alternative energy models, but I still see it, unfortunately, far away ”.
