Supply chain crisis hits world economy as companies face higher input costs

NEW DELHI : A prolonged supply chain crisis could negatively impact the global economy for longer than expected earlier. Disruption in global supply chain mechanism including shipping operations could last well into next year as surging Covid cases threaten to hamper factory production in Asia.

As a result of the supply chain crisis, manufacturing companies across the globe are facing shortages in key components and parts. This has not only led to delay in operations but they also have no choice but to bear high costs for raw materials.

The situation is so bad that manufacturers are even being forced into bidding wars to get space on vessels, leading to higher freight costs. As a result of the supply disruptions and higher shipping charges, some exporters are raising prices sharply or simply cancelling shipments, reported bloomberg.com.

COMPANIES FACE SEVERE HURDLE

Companies around the globe including India are facing severe challenges due to the ongoing global supply chain crisis. Some companies are struggling to find necessary components, while others have seen their input costs skyrocket.

Some companies in India have already passed on higher costs to customers, but are worried that they may have to increase rates further in the wake of prolonged supply disruptions and costlier materials.

China’s shutdown seems to be hurting manufacturers the most. Chinese restrictions to flush out Covid-19 have led to major disruptions in trade, as per the bloomberg.com report.

It is worth mentioning that the shortage of containers and high semiconductor prices are the two biggest challenges for companies, especially those that manufacture automobiles and electronic products. Experts believe that these factors could lead to a rise in global inflation, which could impact many countries.

A prolonged supply chain disruption could be catastrophic for India as the country is already witnessing high prices due to inflation triggered by high fuel prices.

If companies decide to hike prices due to supply chain disruptions ahead of the festive season, it could lead to lower demand during the crucial quarter.

Source : India Today