Supply Chain Disruption Continues Due to the Pandemic

During the pandemic, the global supply chain began experiencing major disruptions. Kathleen Iacocca, PhD, an associate professor of management and operations in the Villanova School of Business, says that this issue is currently more severe than at the beginning of COVID's spread.

Per the professor, the supply chain relies on effective forecasting, inventory control and logistics of supply and demand. At the start of the pandemic, the supply and demand scale became off-balance due to panic purchasing. Today, one reason it's much worse is that the supply went down.

"You can try and push supply back up, which is what President Biden is doing with having ports operating 24/7. [But] Costco or Target can make as many phone calls as they want to Hasbro asking for Barbies, and if they don't have them, they can't just wave a wand and get them," says Dr. Iacocca.

One option, if there's an imbalance, is to push demand down. "As a retailer, you can raise prices. That will help bring the supply and demand into a balance until the logistics part can catch up," says Dr. Iacocca. "But that can lead to dangerous issues. The people that can afford things are going to continue buying product, and it will exaggerate the differences in socioeconomic status."

Dr. Iacocca predicts, with the upcoming holiday season, supply will simply not be able to meet demand. "In a normal world, retailers can forecast and build up inventory. In the future, demand will continue to go up while the supply doesn't get any larger and will just increase the gap between the two."

In the meantime, small businesses can expect challenges. "If there's a short supply of lumber, Home Depot can afford it more than Mom and Pop's Lumberyard. Raising prices are a risk for those that can't necessarily afford things, but also the small businesses," says Dr. Iacocca.

Ultimately, Dr. Iacocca predicts that supply could catch up with demand by March (at the earliest), depending on two things: "First, that the labor force doesn't remain as is. If you're playing the game of catchup, you’re working overtime. Second, you’re counting on factories not shutting down again because of COVID. March is the assumption that you have the means—and you just need the time and a period where demand does not continue to go up."