In this article we will tell you about the 6 most important challenges that all executives in the supply chain will face in 2022. These challenges are:
- Port congestion
- Increase in freight costs
- Supply Chain Restructuring
- Shortage of materials and labor
- Inflation
- Complexities in Demand Planning
Supply chain challenges
The Pandemic has forced the way in which management teams approach supply chain operations, critical procurement , and the sources of value that emanate from them. While 2020 and 2021 were not easy, 2022 will not be the respite that many expect. Here’s what supply chain executives should expect in the coming year:
1. Congestion at ports
During 2020 and 2021, historic waiting times have been generated on ships that cross ports around the world. In October 2021, more than 50 containers were dammed in Los Angeles to unload containers from China. While in other ports in the world, traffic jams occur with ships waiting to be loaded. These bottlenecks at both ends of the Chain generate delays in response times in import and export operations, which affects local supply chains.
For its part, the NCBFAA has proposed solutions to review this problem by reviewing metrics , disruptions in labor and infrastructure, which reveals that the solution to this still has several years ahead.
2. Increase in freight costs
Transportation by tractor-trailers and intermodal solutions reached historical maximum prices in 2020. From 2020 to 2021, costs had double-digit increases, as well as, for example, the cost of low beds reached (+27 %). The cost of sea and air freight was close to these increases. A combination of variables has created a perfect storm that makes it extremely difficult to move any cargo capacity.
To address this, executives need to restructure, reevaluate and strengthen their agreements with carriers . While new terms that will result in higher costs is the price that must be paid for having merchandise on time.
3. Supply Chain Restructuring
The restructuring time does not allow any longer to wait and 2022 is the year to do it. Next year will be a year to pivot for those companies looking for more reliable supply . This may involve relocation, supplier diversification or new agreements with carriers . Leaders must be decisive in recognizing that change is necessary and have the will to break and rebuild agreements that are obsolete.
Some questions to ask are: Do supplies need to be obtained closer to the operation site? Leveraging multiple suppliers for a single material? Strategically align with business partners who have more control of the supply chain?
4. Shortage of materials and labor
The rollercoaster of layoffs, remote work and job exodus in 2020 and 2021 will undoubtedly impact 2022. The complexity and demand for key jobs within the supply chain will make the implementation of technology and automation even more necessary to create cohesion. It is expected that Procurement teams will be reduced and that with machine learning action can be taken more expeditiously.
This coupled with the fact that the ISM ( Report on Business ) states that in all raw materials there will be a shortage or increase in prices. Executives can adapt by adjusting lead time , rethinking inventory and diversifying suppliers.
5. Inflation
The prices granted by suppliers are undoubtedly rising and now it is a matter of time before they are passed on to consumers. The concern that arises is how will supply chain executives keep prices low without affecting the value chain? Here again the answer lies in the implementation of technology. Supply chain leaders will have to invest in better technologies to mobilize data insights that generate savings. Smarter procurement becomes imperative, which should allow the burden of inflation and higher costs to be absorbed.
6. Complexities with Demand Planning
In the last 24 months, the data generated for demand planning is not reliable. This has resulted in the projection based on recent history becoming uncertain. Leaders need to focus on both short-term and long-term trends to form benchmarks that allow forecasting everything from inventory levels to budgets.
What is undoubtedly coming is an increase in prices, which must be contextualized, which moves away from the traditional analysis of the data obtained in the last year.
Ultimately what is coming for supply chain leaders is the opportunity for a more holistic and intelligent evaluation of procurement operations.
Based on English article: SCM DOJO. Dr. Muddassir Ahmed (Ph.D)
