“A supply chain crunch that was meant to be temporary now looks like it will last well into next year as the surging delta variant upends factory production in Asia and disrupts shipping, posing more shocks to the world economy.”
This is the opening paragraph from a recent Bloomberg article entitled “The World Economy’s Supply Chain Problem Keeps Getting Worse.”
Many of our manufacturing clients are facing shortages of all types along with the significant increase for raw materials. The Bloomberg article also reports the significant increases in cost just to ship products as the article notes that the cost of sending a container from Asia to Europe has increased 10 times since May 2020 and from Shanghai to Los Angeles has increased six-fold.
From a legal perspective, many of our clients are scrutinizing their contracts of all types, including their force majeure clauses. The force majeure discussion has changed over time.
In 2020, there was a lot of discussion about companies claiming force majeure due to the decrease in OEM and/or customer business. In 2021, there has been significant discussion about whether suppliers can fulfill orders due to the inability to obtain materials that have never posed a challenge in the past. There is no sign that these supply chain issues are going to subside anytime soon.