- My name is Edward Anderson and I am the Wright Centennial Professor
for Management of Innovative Technology
in the Information, Risk, and Operations Management Department
of the McCombs School of Business.
The shortages cause people to defer things such as buying cars, replacing appliances.
A car has 10,000 parts in it.
And if you're missing any one of those 10,000 parts,
you can't make a car.
And the supply chains are so complicated
that it's almost inevitable that there's going to be some place
that's not going to be able to make the parts that are necessary.
And that is true not only for cars, they're heavy,
but also for computers, because there's shortages in semiconductor chips,
which actually have another issue that's been going on with them, too,
which is longterm, is that the demand has been increasing rapidly for them
because of artificial intelligence.
But COVID made this much worse because a lot of people started working at home
and they all wanted computers.
And because they're stuck at home, they wanted, when they weren't working,
to have some fun, and hence they're buying new electronics,
they're buying game consoles, and so on.
Then we have to deal with the fact
that we can't get what we want where we need it.
Right now, we have a situation in which we have less trucking capacity
than we did last year, because no new drivers were trained.
Less maritime shipping, which transports goods from Asia,
the factories couldn't produce in Asia, and hence there was nothing to ship,
and so a lot of companies couldn't afford to keep their ships running,
and so the fleet of ships is smaller than it used to be.
But because passenger flights are down, especially intercontinental ones,
we don't think about it, but a lot of the cargo that is shipped,
say, from Asia to the US, or from the US to Europe,
it's actually shipped in passenger airplanes.
And then there is the humble container. We also have a shortage of containers,
and in fact, actually, that's probably the biggest problem right now.
There weren't any made during the pandemic.
In addition to that, because all these shipping times increased,
the amount of material that a given container can carry
in a given month, it's going to make fewer trips.
So it can carry less.
And so that is a huge pinch point.
So you're looking at 2022, 2023.
The ships, air freight, training of truck drivers,
and then on the manufacturing side, one of the issues we had, too,
is that we have all of this manufacturing equipment which also has to change
because producing things, for example, for home use as opposed to,
particularly factory and office settings, which may never be the same,
you actually have to use different machinery to package that stuff,
and that takes, even under the best of circumstances, 8 to 12 months.
Semiconductor shortage,
there needs to be more capital equipment produced there,
so again, that's going to take at least a year.
And then there's this other issue, is that when we have these shortages,
they tend to reverberate a little bit back and forth through the supply chain.
It's called a bullwhip effect, and that needs to settle down too.
So about late '22, early '23 is about right.
Having said that, some things will get better earlier,
some things will get better later.
With respect to cars, electronics and so on,
if you don't need to buy one, don't.
The market will calm down here '22, '23, and at that point,
once we've got our supply back up to something approaching normal,
then the prices will drop to something normal.
That really should be deferred as long as possible.
I know that's not great news, but I'll tell you,
I'm going to drive my current car into the dirt
over the next couple of years rather than replace it.
Food will get better, frankly, perishables like, for example, coffee,
coffee will get better here fairly soon.
So a lot of the food goods will get better.
Domestically, that's going to get much better quickly.
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