As you might have heard, the supply chain is in pretty bad shape right now. Thanks largely to the pandemic’s disruption of life as we knew it, manufacturing and delivery of goods and services are at a crawl, leading to rising costs, delays, and plenty of anxiety to go around. It’s a complex issue, but Uber Freight cofounder Lior Ron has a simple explanation for it.
He broke the problem down to three key factors while speaking at the Fortune’s Brainstorm Tech conference in Half Moon Bay, Calif. this week. First, he pointed to increased demand from consumers who are shopping from home. Second, to the huge strain that demand has put on the companies delivering those goods. Third and finally, he blamed uncertainty, which leads to consumers hoarding goods and manufacturers hoarding raw materials.
Ron focused on the issue of trucking, pointing out a massive problem: “There’s no truck drivers.” He said that there are 10 to 15% fewer truck drivers now than there were before the pandemic, thanks in part to drivers not wanting to be out on the road for 200 nights a year while COVID is still prevalent. Then there’s the issue of the semiconductor shortage, which has led to slower production of new trucks.
“The average time to deliver a new truck now because of the chip shortage and the labor issues is actually 18 to 24 months, compared to three to six months on average,” he said. “You’re looking at an all-time high on demand and an all-time low on supply, and it’s a mess. Now, things are easing … and the administration’s taking action, but it’s a big ocean to boil, so to speak.”
Lynn Torrel, chief procurement and supply chain officer of the manufacturing company Flex, added that it’s just been one perfect storm after another. For that reason, she said, the supply chain likely won’t be back to normal for another year to 18 months.
“It’s not been one event — it’s been multiple events that have taken place,” she said. “There’s a fire in a Renaissance facility in Japan, there’s the severe weather in Texas, there’s the Suez Canal, there’s COVID outbreaks in Southeast Asia, there’s the new variant — all of these, as we’ve gone through it, we would understand the situation, scope it, determine how to move forward, make progress, and then be impacted by another supply-chain event. When we talk about the future and when we’ll get out of this, we can make a prediction on what we know today. But any new potential shock to the supply chain is going to have that ripple effect throughout.”
She says she has as solution—though it would take a significant buy-in from competitors around the globe, not to mention a huge logistics undertaking.
“The not-so-modest proposal is, ‘What if, across the ecosystem, this complex ecosystem, we share our data, we share our signals to an independent third party that then uses artificial intelligence, predictive analytics to determine what the true demand should be?’” she said. “Then they’re able to feed that to companies like Flex, just that specific data to the semiconductor suppliers, to the [fabricators] so we can understand what investments we need to make and, frankly, get to a point where supply chain goes back into the background and operates efficiently and effectively without causing so much drama to the front.”
Torrel recognizes that this is a massive ask but, given how dire things are right now, she believes this step is necessary to tame the supply chain and get it back to where it was before COVID hit.
“Personally, what I think we need to do is really come together as a consortium across the ecosystem to brainstorm potential ideas,” she said. “As supply chain professionals living through what we’re dealing with today, I truly believe we have a responsibility to look for ways to do something different so we don’t have challenges like we’re facing today in the future.”
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