News & Publications
The Future of The Global Supply Chain
The COVID- 19 pandemic brought significant challenges for the supply chain, the rapid spread of the virus, the international shootdowns, and the logistic disruptions reduced industrial and transportation activities creating chaos in the global supply chain. Mike Mayran, the director for the Massachusetts Port Authority says, “There was not a port of trade lane across the word that has not suffered the effects of the pandemic.” Even though the economy is slowly starting to emerge thanks to the vaccine’s distribution, the global supply chain seems to have a hard time trying to get back to normal. According to the economist Eurler Hermes, production shortfalls are behind 75% of the current contraction in global trade volume, while logistic bottlenecks such as the shortage of shipping containers are the cause of the remaining 25%. The question that all the experts are asking is how long will COVID-19 supply chain disruptions last? And what is there to expect in the global supply chain industry in 2022?
During these past two years, the supply chain experienced the need to adapt to volatility and disruptions. Many industries started investing more in digital supply chain technologies and risk management strategies to develop more supply chain capabilities. Companies realized the importance of having an effective supply chain plan of action that rapidly prepares and adapts business models to overcome unpredictive challenges. Looking forward, predictions for the supply chain in 2022 seem uncertain. According to CNBC writer Abigail Ng, the three factors that could start to normalize trade in the second half of 2022 and prevent another crisis due to the new Omicron variant are cooling customer demand, creating healthy inventory levels, and increasing shipping capacity.
Despite all the new challenges, experts remain optimistic and expect new regulations to take place and increase production and transportation capacity. Last October, President Biden announced that Los Angeles and Long Beach ports, two of the largest ports in the United States, will be working 24 hours a day 7 days a week. Since these ports are home of 40% of the shipments that are transported from and to the Unites States, this is a key step to increase the moving of goods and overcome the global supply chain disruptions. Also, companies as Walmart, Target, Home Depot, Samsung, FedEx, and UPS are committed to increase the number of shipments and goods that are delivered to factories and customers’ doors in a daily basis. According to Goldman Sachs, the supply chain issues will begging to ease but only after passing the ongoing seasonal peak in shipping demand; in the meantime, customers will pay more and have access to less. The new regulations are working on margin, but to truly overcome the crisis it is necessary to assess labor shortages and lack of coordination among supply chain participants.
According to Per Hong, senior partner of Kearney consulting firm, Omicron will be another test of resilience for the supply chain and the economy. While the COVID-19 threat persists, the supply chain issues will persist as well. There is when business and governments must come up with long-lasting and effective solutions to overcome challenges in the manufacturing, transportation, and logistics processes. Business must work hard on their contingency plans and risk management strategies, discuss what-if scenarios, and come up with proper strategies to overcome future consequences while making sure that profits and customer satisfaction are secured. Also, after the industry is able to understand how the supply chain behaves in the faces of crisis and identify bottlenecks in the process, it would be easier to discuss possible solutions and address issues timely and efficiently.
In conclusion, companies today need to focus on surviving the pandemic while looking for long-lasting solutions that will benefit and prepare them for future uncertainties. The supply chain has evolved, and during the pandemic it has highlighted its important in the economy. Even though the future for the global supply chain seems unknown, the companies investing in hiring supply chain specialist, focusing on improve communication between the supply chain participants, and adding new technologies and risk management strategies, are the ones that will sustain and overcome volatility over time.
Contributor: Paula Beltran
About Allyn International
Allyn International is dedicated to providing high quality, customer centric services and solutions for the global marketplace. Allyn's core products include transportation management, logistics sourcing, freight forwarding, supply chain consulting, tax management and global trade compliance. Allyn clients range from small local businesses to Fortune 500 firms. Allyn conducts business in more than 20 languages and has extensive experience in both developed and emerging markets. Highly trained experts are positioned throughout North and South America, Europe and Asia. Allyn’s regional headquarters are strategically located in Fort Myers, Florida, U.S.A., Shanghai, P.R. China, Prague, Czech Republic, and Dubai, U.A.E. For more information, visit www.allynintl.com.