Supply Chain Disruptions and the Economy

A series of events have taken place over the past two and a half years that have exposed serious problems in supply chains and caused new hurdles to overcome. It seems that no industry is immune to the supply chain disruptions that have occurred and continue to occur. However, the struggles of a few specific industries, particularly, have greatly impacted the economy.

What’s Causing Supply Chain Disruption?

Supply chain disruptions, or strains on production networks, haven’t been confined to one area or nation. Rather, the entire global economy has felt this pain. So, how did we get here?

The decline and recovery in economic activity during the first year of the pandemic resulted in massive shifts in demand and supply that many operations couldn’t keep up with. As new variants of the coronavirus emerged, some sectors, such as factories and ports, had to completely shut down again, bottlenecking the supply chain over and over again.

Imported goods, such as cars, construction materials, food, and fuel, are particularly vulnerable to global supply chain problems.

While most industries were already experiencing pandemic-induced challenges, the war between Russia and Ukraine and the resulting trade restrictions made things even worse. Many nations that depended on Russian oil have had to restructure their supply chain completely, driving an already-high demand for fuel even higher.

Those high fuel prices, in particular, have made transportation much more expensive and driven the cost of nearly every good higher. This has significantly impacted the cost of living for most of the global population by increasing the basic cost of necessities like food and gas for nearly everyone.

Supply Chain Disruption Leads To…

One of the biggest consequences of supply chain disruption is inflation. It’s basic demand and supply; Supply shortages combined with heightened demand lead to price increases. The increasing cost of raw materials, freight, and labor has been passed onto the consumer via higher prices in nearly every category.

Prices continue to surge, and shortages are still commonplace. However, many countries have made aggressive interest rate hikes in an effort to tamp down inflation by slowing the economy. Should these policy changes have the desired effect and slow economic growth, demand would decrease, and prices could stabilize. While that may help with some supply chain issues, a slow economy and potential recession will surely hurt businesses and consumers in other ways.

So… What’s Next?

Everyone, including business owners and investors, has felt the impact of the global supply chain disruption to some degree. And the extent of the damage is still yet to be seen. In order to diversify one’s portfolio so as to not have all your eggs in one basket (any egg can be disrupted by the supply chain) consider becoming an accredited investor.

As an investor, knowing how supply chain issues present problems or opportunities in various industries can help you make smarter investments. Since the onset of disruptions across global supply chains, which began in late 2020, new rules have been implemented that expand the definition of accredited investor. This is important because those with an accredited investor status certificate have access to Regulation D offerings and, thus, may be able to diversify your portfolio with investments in private sectors.

Businesses need to make their supply chains more flexible, agile, and resilient to avoid consequences such as this in the future. The new rules, which went into effect on December 8th, 2020, also expand the pool of potential investors for private companies. Business owners can learn how to verify accredited investors to attain funding more quickly.