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The supply chain outlook for 2022

illustration of a person standing next to a monitor showing a process graph representing the supply chain

As the pandemic and the resulting supply chain disruptions continue into 2022, U.S. businesses are still struggling to hire workers, including truck drivers and warehouse workers, and product shortages are ongoing. However, there are signs that some of the freight congestion is easing as supply chains gradually find balance. 

Fortunately, the pandemic-triggered global supply chain pressures that have disrupted the flow of goods and sparked high inflation may have finally peaked, according to a recent analysis by the New York Federal Reserve. This is based on a number of indicators including container shipping rates, air freight rates, and manufacturing data. In the words of Federal Reserve economists: “global supply chain pressures, while still historically high, have peaked and might start to moderate somewhat going forward.” ¹

By most accounts, supply chain bottlenecks are easing and the pressure on global supply chains is letting up, which can help to ease inflation. 

Freight congestion is abating at busy West Coast ports, thanks to new remediation measures including extending port operating hours, vessel queuing systems, and new forecast tools. The ports of Los Angeles and Long Beach are also considering implementing dwell-time charges to companies whose full import containers linger at marine terminals; both ports recently reported reduced volumes of unprocessed containers. These West Coast ports are also considering implementing fees for empty shipping containers. 

In December 2021, the Port of Los Angeles said strong U.S. imports will remain high into February and push even higher during the second quarter of 2022 as retailers return to replenishing depleted inventories.² Also in December, Port of Long Beach Executive Director Mario Cordero said in a briefing he expects the congestion that has caused upheaval throughout supply chains to improve by mid-2022.³

Other experts say overall shipping bottlenecks are expected to persist well into 2022 – and even beyond. Slow capacity growth, a shortage of containers and truckers, and the ongoing semiconductor chip shortage which has limited new truck production for last-mile delivery are among the reasons for prolonged disruption.⁴

Analysis by global trade credit insurer Euler Hermes found that softened consumer demand, rising inventory levels, and increased shipping capacity will start to normalize trade in the second half of 2022. Economists at the company estimate that production shortfalls are the cause of 75% of the current contraction in global trade volume, while logistics bottlenecks are the cause of the remaining 25%.⁵

Putting supply chain remedies in place 

According to the Shopify eCommerce Market Credibility Study, a commissioned survey conducted by Forrester Consulting on behalf of Shopify in 2021, shipping delays, shipping costs, and manufacturing delays are the top supply chain concerns that brands expect to encounter in the next 12 months.⁶

The Shopify eCommerce Market Credibility Study also found that many brands—43% of those surveyed—are changing their shipping strategies to reduce the impact of global shipping delays. New strategies include increasing manufacturing capacity, increasing supply chain speed, and improving collaboration with supply chain partners. 

Many manufacturers and brands in the retail supply chain are also positioning stock at distribution points closer to end customers and building up inventories as a buffer against future disruptions. Others are considering moving production closer to home with longer term, capital-intensive strategies such as nearshoring (moving production closer to where products are distributed and sold) and reshoring (moving production back to where it was originally located).

One thing is certain: digitization of the supply chain and the lessons learned during the pandemic are pulling supply chain management into a new era. More firms are taking contingency planning seriously. One hundred percent of shippers and 96% of 3PLs surveyed in mid-2021 for the 2022 26th Annual Third-Party Logistics Study said they are enhancing their readiness and continuity planning as a result of the pandemic-triggered supply chain disruptions.⁷

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