From the onset of the COVID-19 pandemic to now, there’s been a seemingly never-ending array of supply chain hindrances. From staff shortages to rising freight costs, and a shortage of raw materials to war in Europe, a slew of issues is negatively affecting logistical capabilities. While some of these issues have carried over from the worldwide pandemic, others have only recently surfaced in 2022. Making the necessary pivots to remain viable will necessitate companies to get clued in on all the latest global supply chain trends. Remaining out of the loop will lead to a failure to improvise, which will result in a loss in customer loyalty when demands can’t be met on time.
To stay attuned to the industry, read about eight emerging trends in supply chain management that ABI Research has seen unfold in 2022.
1.) COVID-19 Still Haunts Supply Chain Managers
The COVID-19-induced facility shutdowns caused widescale labor shortages in everything from warehouse workers to drivers. And once the world was ready to ramp up production again, vacancies still remained, resulting in frequent logistical delays. Adding to this, Chinese facilities, subject to a Zero-COVID policy, could still be shut down at any time. In fact, Shenzhen, a city of 21 million people, was recently shut down to curb COVID-19 concerns. As a result of staff shortages, companies often have to increase wages and improve benefits to attract and retain talent. Unfortunately, the costs are offloaded to the consumer, making labor shortages a contributing factor to rising prices and inflation.
2.) Russia-Ukraine War Causes Supply Chain Shortages
If recession rumors and staff shortages weren’t enough, enterprises also have to manage the adverse effects of the Russia-Ukraine war. Between Russian businesses being sanctioned and Ukrainian exports being cut off, this trend has resulted in significant supply chain shortages, notably grain, gas, and precious metals. As a trickle-down effect, food and energy prices have amplified. For Europeans, an energy crisis is looming and could further strain the supply chain for companies operating in the region. For example, German automotive Original Equipment Manufacturers (OEMs) Volkswagen and BMW need to find new sources of wire harnesses as Ukraine was their main supplier before the war.
3.) Union Strikes in California
As pointed out in the Research Highlight, Is Seaport Automation the Answer to Supply Chain Constraints?, the West Coast of the United States has experienced some union concerns. The Port of Los Angeles and the Port of Long Beach are the two busiest seaports in the world’s largest economy, the United States. While port congestion was already an issue at these ports during the height of the pandemic, labor disputes against automation are now setting back these crucial supply chain stops. The labor strikes are putting more pressure on East Coast ports, which are already overwhelmed. If an agreement can’t be made, there’s a real risk of vessels and containers sitting idle off these Southern Californian docks. Another trend to watch in the United States is the railroad labor disputes, which to the relief of the ports, reached a tentative deal for now.
4.) Retailers Stocking Up Inventory
Current global supply chain disruptions made major retailers abandon the Just-in-Time (JIT) inventory management model. Uncertainty about future supply has caused retailers to maintain significantly higher inventory levels in their warehouses than they once had. Just look at the numbers to see how this supply chain trend has played out. For example, the U.S. vacancy rate for industrial spaces, which are used by retailers, wholesalers, and third-party logistics companies, is at a record-low 2.9%. Additionally, warehousing space rents were up 20% Year-over-Year (YoY) in 2Q 2022. Then there’s Amazon, which spent US$31.2 billion on property and fulfillment centers in 2021. Amazon, like other retail giants, is simply creating more space for inventory and logistical relay centers that will undoubtedly make their supply chains more resilient for the long term.
5.) Obstacles to Key Shipping Routes
The majority of large shipping companies have suspended shipments to and from Ukraine and Russia, due to the unpredictability of operations in these regions. On top of that, important supply chain stops in the Black Sea, such as Odesa and the Sea of Azov, are heavily restricted. On a positive note, in early August, Ukraine exported grain for the first time since the war began in February.
A growing trend, especially among Eurasian supply chains, is the use of alternative shipping routes to move goods to other countries without passing through Russia. Thus far, maritime trade has proven to be the most practical option.
6.) Recovery May Be on the Horizon
With the Global Supply Chain Pressure Index (GSCPI) down 57% from December 2021, there’s a real reason to hope that logistical nightmares could be eroding. Be that as it may, the index is still experiencing unprecedented high levels. Behind this trend is the fact that maritime transportation constraints are relaxing. Indeed, the world is well on its way back to pre-COVID-19 shipping spot rate levels. Likewise, logistics juggernaut Maersk expects the ocean shipping industry to normalize in 4Q 2022. However, ABI Research sees this prediction as being a little optimistic because there is still a significant buildup of materials, appliances, and cars that haven’t been shipped to their final destination. Nevertheless, it’s not unreasonable to think the global supply chain will smoothen out by next year, especially as inflation will ease the demand for goods.
7.) A Clear Need for Technological Investment
If there is one thing that COVID-19 and the current macroeconomic headwinds have revealed to enterprises, it’s the need for smart technologies to maintain logistical efficiency in uncertain times. Warehouse Management Systems (WMS) and Yard Management Systems (YMS) are important enablers of automation, inventory control, accurate demand forecasting, employee Key Performance Indicators (KPIs), warehouse robotics, and other end-to-end supply chain functions. These software systems provide full visibility into day-to-day operations and extract invaluable data analytics that can be used for efficient stock management and improved utilization of storage space.
Beyond these software systems, other technologies like Radio Frequency Identification (RFID), barcode scanning, and the Internet of Things (IoT) can collect data at each stage of the supply chain, such as ports, handovers, yards, and depots. This allows managers to make sense of various data points for better decision-making and to detect bottlenecks.
8.) Habitually Assessing Processes
Due to the ever-changing nature of the modern supply chain, there’s no question that companies should routinely review processes to maintain efficiency and follow regulations. For example, U.S. pharmaceutical firms must pay close attention to serialization regulations that will require the installation of new sensors and full track and trace. Moreover, this supply chain trend necessitates companies to account for regional differences in regulation to avoid fines, shipment denials, and facility shutdowns. On the technology front, digital twins are a great way to understand the degree of impact that specific risks represent, helping managers control the threat of theft, damage, and fraud.
Shielding the Global Supply Chain against Unpredictable Disruptions
To say that supply chain leaders face pressure is an understatement. Numerous challenges have presented themselves from a multitude of angles in the last couple of years. Standing out on the list of supply chain challenges are lingering COVID-19 effects, inflation, war in Europe, rising shipping and gas prices, and a growing need for end-to-end visibility into logistics operations. It seems like when one issue slowly fades away, a new one quickly emerges.
Now, in 2022, and in the future, the key to mitigating external pressures will rely on new and innovative thinking patterns. Recent supply chain trends have highlighted the need for resilience. That means technological adaptation, such as automation, digital twins, and precise demand forecasting, to name a few. Besides that, it’s clear that supply chains must become versatile and diverse—meaning less reliance on one key region. Whether it’s a war, natural disaster, government policy, or something else that constrains operational efficiency, it’s best to have alternative means of continuity.
To learn more about the effects of current macroeconomic and geopolitical challenges on various industries, including a deeper look into supply chain management trends, download the whitepaper: 2022 State of Technology Report: The Future of Technology in a Tumultuous World.