THE MIDDLE MILE: How to alleviate the global bottleneck.

Thanks to the pandemic, supply chain issues are impacting everyone. Amid a shortage of truck drivers, increased energy costs, backlogs at ports, and more, it's helpful to understand what goes on behind the scenes before goods arrive on our doorstep.

"Supply chain" is a fancy term used to define the getting of products from where they are made to where they are consumed, says Jarrod Hunt, EVP of Industrial Services at Colliers.

To illustrate, Hunt gave an example of durum wheat grown in Montana for spaghetti noodles. That bushel of wheat may be transported thousands of miles, cleaned, milled into flour, and processed into noodles before traveling to multiple warehouses for various distribution companies. This all occurs before it ever ends up on the grocery store shelf. In some cases, that wheat may even be transported to a foreign country for processing to return to the US as the final product.

Hunt says that "supply chain" became a standard term due to the time-compressed disruption to that very sophisticated system of specialization, transportation, and trade--a disruption primarily caused by the uncertainty of the COVID pandemic.

"Things such as closing factories and warehouses due to worker health concerns, suspending orders on semiconductors for automobile and electronics plants, and shifting low-key manufacturing capabilities to other products such as PPE equipment caused prevalent and unforeseen choke points for various products," Hunt says. The supply chain, he says, could be thought of as a finely-tuned system of businesses that supply other companies. Each is wholly dependent on the system working flawlessly, as it has for decades.

In another one of Hunt's examples, hog farms in the Midwest were euthanizing herds and dumping them in pits early in the pandemic because no meat processing facilities were open to taking the animals. Then, just a few months later, pork hit historically high prices because average production never made it to the markets.

"There are hundreds of other examples--similar to the pork issue--that created wild 'super-cycles' in markets that no economist or financier could model out or react to with the normal predictive expectations," Hunt says. We are still dealing with these issues today. From a global perspective, trying to catch up to what the standard supply and demand balances have created significant imbalances in our transportation capacity and average production efficiency, Hunt says.

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