2021 was a tough year for businesses relying on an efficient, fast-moving global supply chain. Following a difficult 2020, which saw delays caused by suspended manufacturing because of the COVID-19 pandemic, the supply chain failed to recover, and suffered further with shipping backlogs, the US labor shortage, and the outbreak of the Delta variant.
Now, in 2022, many had hoped for a recovery to take place, and for the supply chain to run smoothly once again. Will that be the case? Or will supply chain disruptions remain?
Pandemic Uncertainty Looms Large
Unfortunately, we start with the COVID-19 pandemic. Two years after it first impacted the global supply chain, the COVID-19 virus is still dictating supply chain management strategies.
At the end of 2021, a surge in cases caused by the more-transmissible Omicron variant saw huge portions of the workforce required to self-isolate. This exacerbated the labor shortage already taking place in the US and caused global delays as every step of the supply chain faced reduced productivity.
While no one knows when the pandemic will ‘end’, or how many more variants will arise, one thing is for certain: the future of supply chain is inextricably linked to COVID-19.
Problems at the Ports
In March 2021, one of the largest container ships in the world, Ever Given, became wedged in the Suez Canal, blocking a route that around 12% of all global trade passed through that year. Once Ever Given was freed after six days of stalemate, more than 300 vessels were queuing up to pass. The effects of this blockage were experienced almost immediately, and well into the second quarter of 2021.
More recently, unprecedented port congestion at Long Beach and Los Angeles, California, has significantly disrupted the supply chain. In early December, the average wait at anchor in Los Angeles was 20.9 days, and in mid-December, in San Pedro Bay, more than 102 cargo vessels were anchored. With ships re-routing to avoid the logjammed West Coast ports, traffic increased dramatically on the East Coast during the fall, leading to congestion at ports in New York/New Jersey, Virginia, Charleston, and Savannah.
Unfortunately, analysts suggest that problems at the ports are getting worse, not better, as we move into the new year. The US West Coast is still facing extreme port congestion and huge queues, which experts say won’t be cleared until well into 2022.
Increased Focus on Risk Management
As general demand for products intensified in recent years, suppliers faced pressure from consumers to set, meet, and maintain challenging delivery schedules. As a result, to ensure demand was met, manufacturers and suppliers dealt in extreme margins, and supply chain managers operated with minimal backup stocks.
The onset of the pandemic exposed these flaws. Suppliers and manufacturers quickly discovered that any disruption to the supply chain highlighted their limited inventory and left them unable to deliver. With this experience fresh in their minds, businesses and supply chain managers are shifting their focus to rebuilding the resiliency of their inventories, so the next time unexpected issues affect global supply chain, they’re prepared.
The Digital Transformation Continues
Over the last two years, businesses have been forced to invest in technology and shift to a more digital approach. A combination of factors led to this change and will continue to necessitate a digital transformation.
Firstly, the pandemic, which forced businesses to give employees the ability to work from home, utilizing modern technology to maintain productivity and connectivity across their organization. Then, there’s the labor shortage. Whether caused by unfilled vacancies or self-isolating staff, reduced workforces have placed focus on automation, and how supply chains can be optimized through AI and technology.
As 2022 unfolds, it’s likely that businesses will continue to adopt technology as a more critical part of managing their supply chain.
Further Regulatory Restrictions
In 2021, two major regulations were announced in Europe: Norway’s Transparency Act and Germany’s Supply Chain Due Diligence Act. With these acts taking effect within the next year, and a further EU Due Diligence Act expected to be approved in 2022, supply chains across Europe may be unsettled as businesses prepare to abide by the upcoming restrictions.
In the US, a recent act signed into law by President Biden will affect all organizations in the country. The Uyghur Forced Labor Prevention Act was enforced on December 23, 2021, and means all goods manufactured even partially in the Xinjiang Uyghur Autonomous Region of China are not entitled to entry at US ports, unless an exception is granted by US Customs and Border Protection (CBP).
As organizations prepare to deal with this wave of regulations, they’re also likely to be impacted by scrutiny on the impact supply chains have on climate change. Although numerous companies have begun pledging to meet ambitious sustainability goals, it won’t be long until new climate change regulations force all organizations to reconsider the sustainability of their supply chains.
With disruptions set to continue in 2022, CNECT is well positioned to support your organization in thriving despite the challenges. We have negotiated more than 3,000 contracts with an array of reputable suppliers to deliver the products and services our members need at exclusively discounted prices. If you’d like to discover how we can help to optimize your organization’s supply chain during this difficult time, contact our team today.