At the beginning of this year, a local COVID-19 outbreak in China led to a shortage of drivers, air freight warehouse logjams, and over 120 container vessels being stuck on hold. Major ports around the world started experiencing major delays which saw container ships having to queue for several days in unprecedented congestion. Not only that, the sanctions imposed as a result of Russia invading Ukraine forced over a million containers due to travel to Europe via Russia to make their journey by sea instead. Supply lines for nickel, aluminium, wheat, and sunflower oil all collapsed leading to a sharp increase in commodity prices.
But what’s happening now? Does the crisis seem to be easing off or are businesses still facing the brunt of these issues? In this article, five members of Opportunity Network, the world’s largest private digital network for CEOs & investors, share their experiences navigating the global supply chain crisis. They share whether they are seeing improvements in their respective locations, as well as their opinions on when the crisis will end and why.
As of now, we are seeing supply chains recover, however that is relatively speaking. The transportation market is starting to loosen where there is ample capacity to move the freight, whereas last year this was not the case. The demand (freight) was much higher than the supply (truck capacity).
Based on plentiful inventory levels, lower consumer spending, less stimulus to consumers, increased capacity (relative to demand and new capacity entering the market), price decreases in the marketplace (spot and fixed freight mixes), and various other factors we believe this year will be much easier to move freight for supply chains in North America. We are already seeing it happen now, quickly.
The supply chain crisis will not end in 2022 and the consequential disruptions to international trade and commerce will linger well into the future.
While the global logistics industry will eventually recover and thrive, the landscape of the future will be defined by the stories of firms that identify and seize the opportunities in the current predicament and those that fail to do both.
The future of the supply chain industry will undoubtedly be shaped by technology, new international trade rules, and protocols beyond everything we know currently.
For companies in the logistics value chain, the ability to adapt to the changes while remaining organizationally agile, operationally efficient, and cost-competitive is the recipe for success.
2021’s supply chain industry was chaos with its container shortage, space shortage, and sky-rocketing shipping prices fiasco. The big question is whether 2022 will look any different.
The answer? Probably not.
The good news is that the supply chain industry is likely to recover as this disruption was also the inspiration for new and exciting digital solutions, and more technological innovations are likely to follow in the months to come.
Despite its somewhat late bloom, the digital revolution in the supply chain will continue. From freight booking to the customs clearance process, warehousing, and last-mile delivery, the race for the ultimate digital solution is at full speed, and its winners will be the customers!
The supply chain situation will worsen throughout the rest of 2022 and 2023 as the war in Russia continues and the economic war between the USA and China becomes more aggressive.
The USA will continue to keep the transportation cost at high levels while China will keep the energy zones of their factories in order to be able to sell higher and for better margins. Meanwhile, all the countries will continue to keep the rare and necessary raw materials for themselves.
Taking all the above into consideration, as well as the higher green energy cost, I believe these factors will continue to negatively affect supply chains for at least the next year.
We were expecting hockey stick growth as the economy was sharply recovering from the pandemic-induced shock. On the contrary, the post-pandemic quick pick-up met with the Russia-Ukraine war and we saw investors losing hugely in public markets.
The revised macro-economic outlook now looks bleak across the globe, and as a result, the demand for the finished products will be significantly affected. Thus the decreased demand will eventually offset the supply shortage in the marketplace.
Moreover, manufacturing hubs have been operating with their maximum output capacity to cover the backlogs in the supply chain. By the end of 2022, things are mostly expected to return to normalcy. However, the chip shortage is likely to continue beyond 2022. The post-pandemic digital transformation across industries has forced more innovation that also requires more hardware infrastructure to be built around, hence the chip shortage continues to be a concern.