Mercifully, the profound crisis the pandemic imposed on supply chain managers has been a bit less chaotic in 2022. Even so, shipping remains a major headache for industry leaders in the manufacturing sector.
Although COVID-19 has been receding in fits and starts throughout the current year, other global disruptions took their toll on commodity prices, supply chain resilience and logistics. These have included Russia’s war in Ukraine, demographic changes in the labour force, environmental regulations and computer hacking incidents.
Sanctions against Russia over its invasion of Ukraine affected ports throughout Europe. The Port of Rotterdam endured the worst disruptions, with thousands of containers stranded on its docks.
The containers held banned import and export goods headed into and out of Russia. As shippers scrambled to redirect the undelivered goods, they ignored a growing backlog of empty containers.
As a result, these overlooked containers didn’t return to Asia. This aggravated the pre-existing global container shortage. Without containers, manufactured goods sat on Asian docks, creating confusion, delay and rising costs.
With inflation at levels we haven’t seen in decades, rising prices have been leading the global economic news this year. According to Bloomberg, supply chain issues are the leading cause of inflation, representing roughly half of recent price increases.
Even though average delivery times are gradually returning to pre-pandemic levels, logistics costs remain high. According to the S&P Global Supply Chain Survey Report 2022, global supply chain executives saw spending management as their top priority.
Asked about their most pressing challenges, most of the executives surveyed pointed to supply chain resilience as the biggest obstacle. Labour shortages and especially transportation disruptions continue to make it difficult to maintain dependable supply chain partnerships.
Shortages continue to plague the semiconductor manufacturing sector. For example, Pat Gelsinger, Intel’s CEO, predicts the shortages will now continue into 2024. Earlier, he had expected they would stabilize in 2023.
The issue here is the lack of essential manufacturing tools. The foundries that produce semiconductors need to expand capacity, but the sophisticated equipment is simply unavailable to meet required timelines.
Now that microchips are essential in everything from phones to cars to household appliances, this component shortage is another key driver of inflation. Semiconductor manufacturers traditionally adjusted their operating capacities in response to fluctuating demand.
Events over the past two years have thrown this cyclical strategy out-of-synch. Fires in semiconductor plants in Japan and Ukraine and a severe Texas ice storm have aggravated an already severe shortage.
Looking ahead to 2023, several trends are emerging. S&P Global anticipates greater government intervention in the year ahead, as political leaders grapple with inflation, transitions to green energy and international tensions.
The past couple of years have reminded authorities that supply chains have strategic value for national security. Supply chain managers will have to keep global compliance top-of-mind as new regulations emerge.
As inflation persists, consumer demand is moderating. The pent-up demand of the pandemic has run its course, and customers are now resisting price increases.
According to ING, global trade in consumer goods could be facing receding demand and potential over-supply in 2023. Governments are enacting fiscal stimulus policies, but inflation, higher interest rates and energy costs are undermining consumer confidence.
On the supply side, ING expects global container shortages to resolve in 2023. In the meantime, an unprecedented number of new ships will be delivered in 2023 and beyond.
In fact, well over two million twenty-foot equivalent units are on order. This is 260% of the number of new ships coming online in a typical year, and it will increase the installed fleet by 28%.
As a result, shippers will be able to clear backlogs. All this new capacity will tend to lower shipping costs. As all these goods come to market, we may even begin to see oversupply in some categories of manufactured goods.
All these trends point to a gradual return to an emerging “new normal” throughout 2023. Although we may never return to the stable supply chains we’d gotten used to, the obstacles we’ve endured since 2020 are likely to moderate over the next year or two.
Although the outlook continues to improve, manufacturers still face shipping risks and challenges. Kingstec can help your business steer a course through the remaining complications that lie ahead.
Nobody knows logistics in the Asian manufacturing sector like Kingstec. We can introduce you to a range of high-quality, dependable business partners throughout the region.
Why not call us today to discuss how your business can benefit from our 40 years of experience with global manufacturing and logistics?
