Inflation and the Supply Chain (What to expect in 2022)
81Inflation and the Supply Chain (What to expect in 2022)
A few major mistakes can be attributed to inflation and supply chain in 2022. Today we are going to take an in-depth look at how we got to this point, how it’s affected us, and why it’s resulted in such drastic price increases.
The 3 mistakes causing inflation in 2022 were:
1. Wrongly predicting consumers would stop spending…
2. A system for shipping and receiving that already had cracks broke wide open…
3. Mergers and acquisitions in certain industries will make it easier to keep their prices higher in the future…
The first thing that really up things after the first COVID lockdowns in early 2020 and causing inflation was a wrong assumption about how consumers would use their products through the rest of the year. Just as customers went panic shopping, buying every last piece of toilet paper they could find, the manufacturing industry leaders made a panic assumption.
When everything is flowing right, that makes for cost savings. It also exposes us to, if something goes wrong at these small number of choke points, things go wrong in a big way. And if there’s a problem in one piece of the supply chain, it ripples right through to the end buyer creating high costs, low supplies, and inflation.
Sheet metal, semiconductors, aluminum, and other materials suddenly became scarce. So scarce that an 8’ foot 2x4 went from $2.50 to $10 overnight. Since then, it has come down, but that doesn’t mean it will for other commodities. As the U.S. begins to reopen, some trends, like lumber-intense home remodeling, are slowing down.
The world has definitely changed since early 2020, when COVID started. Things are starting to settle back down, but it’s going to be a long time until things get back to the way it was before. And when it does get back, processes and procedures at shipping facilities and our major ports will need to be updated. Reliance on semiconductors from overseas needs to be eliminated when they can be made just as easily here in the states. Sure they might be more expensive, but at least we will be able to get them.
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