The Xeneta-owned data provider’s latest numbers show that air cargo volumes decline by 8% year on year in April following on from a 4.5% fall in March.

Meanwhile, capacity increased by 1% year on year in April, resulting in a nine percentage point fall in the global dynamic load factor – taking into account both weight and space –  to 62%.

However, load factors were “exceptionally high” in April last year at 71%.

CLIVE said that the conflict in Ukraine and Covid restrictions, and the rising cost of living were all having an impact on air cargo.

The fall in demand is likely “exacerbated by the staff shortages jolting airport handling services and manufacturing production”.

Despite the lower volumes and load factors, airfreight rates in April increased by 26% on last year.

“The rationale behind lower load factors and higher rates is the bottleneck on the ground – which appears to be being caused now by not only the shortages of people handling cargo at airports around the world and the severe lack of truck drivers to move the goods, but also by a wider shortage of people for lower paid logistics jobs,” said Niall van de Wouw chief airfreight officer at Xeneta. “We are now seeing this larger theme impacting the entire supply chain.”

Shortages of goods in stores or available online, longer lead times for some products, higher shipping costs, and flight delays and cancellations are all consequences of these market conditions, he added.

“The hike in living costs and lower disposable incomes for consumers are other undoubted contributors to the slowdown in volumes.”

Looking ahead, van de Wouw said that the re-introduction of passenger services for the summer season would also begin to impact the market.

On the transatlantic, for example, load factors dropped by 12 percentage points in one month.

“This was caused by a big jump in North Atlantic passenger capacity as airlines stepped up their summer schedules,” CLIVE said.

Additional passenger flights are also expected to “takes some of the heat out of the demand/supply market,” he said, and potentially lead to a downward pressure on rates.

“During the last week of March, capacity increased by 15% compared to the previous week,” said van de Wouw. “This significant increase in space reinforces our previously stated forecast that the North Atlantic market will most likely be the first to return to some kind of normal, because of the high share of belly capacity on this lane.

“In terms of the dynamic load factor, we are seeing this shift starting to happen as we move from a Seller’s market to a Buyer’s market for air cargo. However, the issues on the ground might delay the Buyer’s market a bit longer.”

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The latest figures from CLIVE Data Services, which is part of the Xeneta rate benchmarking platform, show that demand for March was 4.5% down compared with a year earlier – and 6.5% down on pre-Covid 2019 levels – marking a “sudden interruption to the recovery trend of recent months after the peak Covid disruption of the past two years”.

Capacity in March was down 3% compared with last year and 14% against 2019 levels.

As a result, dynamic load factors – accounting for both weight and volume – stood at 66%, which is the same level as recorded in 2019 and six percentage points lower than 2021 after record levels were reached that year.

Despite aircraft being less full in March than they were a year ago, rates have actually increased by 27% year on year and are up by 141% compared with two years ago.

Niall van de Wouw, chief airfreight officer at Xeneta, said this was down to disruption on the ground.

“There are also still many issues with capacity on the ground. One bottleneck got replaced with another one,” said van de Wouw.

“Load factors are lower this year than they were last year, but prices are higher. The latest disruption in Shanghai is not unexpected but it adds to the worldwide issue of staff absence because of high Covid cases.

“Pilots, cargo handling workers, truck drivers etc, unlike many others, cannot work from home. It’s hardly surprising then to hear the International Monetary Fund (IMF) blaming soaring shipping costs for driving up inflation rates.

“Right now, the airfreight and oceanfreight markets are in general a mess, with shippers and consumers having to pay the price. In the first two months of 2022, we were talking of growing resilience in the airfreight market and a recovery to pre-Covid levels. March data shows how quickly this can change.”

CLIVE also noted an increase in the placement of capacity into the spot market on certain trade lanes, such as Europe-Japan trade, where the amount of chargeable weight at a spot rate increased to 60% of the market, or 20 percentage points higher than February’s spot share.

Rates from Japan to Europe increased to around €5 per kg, nearly 50% higher than the weeks preceding the Ukraine war.

Carriers on the route had removed capacity as they sought flight paths that avoided Russian airspace.

“In overall air cargo market terms, March was a step back from the trend we saw late last year and earlier this year. We have been reminded of how the limited control the general airfreight market has over its own destiny and how it is impacted by passenger traffic trends, disruption in the ocean freight market, and geopolitical events,” said van de Wouw.

He added that ongoing disruption in ocean shipping could provide a boost to air cargo demand while higher inflation could have a negative impact.

“Although it is too soon to tell what the skyrocketing inflation numbers in the US will result to, the logistical difficulties on the water between these two continents must put some wind into the sails of the air cargo market.

“With continuously declining schedule reliability of the ocean liners, logistical departments will likely be required to resort to airfreight because of disruptions to their supply chains caused by these record low service levels,” he said.

Source: www.aircargonews.com

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James Gagne, president and chief executive of Seko Logistics, outlined a challenging market for freight forwarders in 2022.

He highlighted ongoing issues in ocean shipping, labour shortages due to Covid hitting port/airport operations, ongoing consumer spending for at least the first six to nine months despite inflation, elevated freight rates, rising e-commerce demand, semi conducter demand/shortages and driver shortages as just some of the challenges facing supply chains this year.

For airfreight, belly capacity also appears unlikely to recover to pre-Covid levels this year.

As a result, 2022 will be “the year for air charters”, he said.

“The focus is on doing more on the charter part and we see the need for charter capacity only growing to service our clients,” he said.

Last year the company used 397 charter flights compared with around 72 flights in 2020. This year Seko expects this figure to grow further by around 20-30%.

Other forwarders have also been busy expanding their charter operations in the opening months of the year.

Geodis will expand its AirDirect cargo network in Asia Pacific as it looks to meet “surging demand” in the region.

AirAsia X (AAX) has formed a new air logistics partnership with Geodis to provide the additional cargo capacity.

As part of the partnership, the airline will provide Geodis with “dedicated scheduled cargo flights” on a new weekly rotation from Kuala Lumpur (KUL) to Shanghai (PVG) and Sydney (SYD) and will also add a second weekly rotation to its existing KUL – Hong Kong (HKG) – Chennai (MAA) – KUL service.

This agreement is set to run for an initial period of six months commencing from January 20 with further extensions to be considered.

All the flight schedules are serviced by aircraft chartered on a long-term basis and will add an extra 320 tonnes of capacity to its charter network each week, Geodis said.

Meanwhile, in mid-January, DB Schenker added charter capacity out of India as it looks to meet capacity constraints.

The forwarder offers charter capacity on a weekly flight operating on the route: Bengaluru-Doha-Munich-Chicago. The new route is being operated by Qatar Airways Cargo utilising one of its B777 freighters.

The flight is in addition to its existing charter operation covering Mumbai, Frankfurt and Atlanta.

Both flights connect three continents as part of the forwarder’s Global Flight Operations Network.

The company told Air Cargo News that the new route would cover a wide range of verticals such as automotive, consumer and retail, electronics, industrial and chemicals, healthcare and aerospace.

Also, DSV has responded to Covid restrictions and lockdowns in Asia by adding extra freighter capacity from Hong Kong and Singapore.

The freight forwarder is adding two extra weekly flights – offering 100 tonnes of capacity each – to its Hong Kong-Liege-Hong Kong loop, bringing its weekly flights on the route to three.

Meanwhile, the company has also introduced a new weekly route from Singapore to Los Angeles.

DSV vice president and head of the DSV Air Charter Network, Mads Ravn, said: “Right now, the market is greatly underserved – especially out of Asia where the situation is being impacted these days by increased Covid incidents and by new restrictions. We are monitoring the situation closely, so we can continue to do what we can to keep our customers supply chains flowing.

“We are also introducing a new DSV Air Charter route from Singapore to Los Angeles (LAX), which can further relieve the pressure on some of the other hubs in the region and also bring a little more flexibility to our customers on our airfreight offerings out of Asia.”

The announcement from DSV came shortly after Cathay Pacific made “substantial reductions” in its long-haul freighter network for the first quarter, with no flights operating to Europe and just seven per week to the Americas.

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This was the takeaway from the World Cargo Summit’s Air Cargo Market Update & Outlook, which focused on the market outlook for 2022 and beyond, hot spots for growth and the outlook for cargo charters.

Niall van de Wouw, managing director at CLIVE Data Services, said the company’s data comparing the fourth quarter of 2021 to the same period in 2019 showed that rates continued to increase on a global level, on average two and half times as high as pre-Covid.

It became tougher to move goods because of the challenges ground handling staff faced in loading/unloading/preighters. This led to congestion, which affected throughput.

“The difficulty in getting goods from A to B pushed up the rates to unprecedented levels.”

In the first two weeks of January 2022 compared to the same period in 2021 rates were up more than 40%.

“Looking ahead we currently see no fundamental changes in the dynamics that are causing these rates to be at these levels that we expect any easing soon.”

Abel Alemu, managing director, Ethiopian Cargo & Logistics Services, added that Covid-related labour shortages and quarantine restrictions “will keep capacity tighter for longer” and this may result in “persistently elevated airfreight rates”.

He added that reduced bellyhold capacity will also contribute to this “upwards pressure on airfreight rates”.

The industry stakeholders agreed that due to full order books for freighters, capacity remains in demand.

Reto Hunziker, group cargo director for charter broker Chapman Freeborn said the company has managed this by using in-house own control capacity including Bluebird Nordic 737s and Magma Aviation 747s, plus third-party carriers. He said that zero LOPA configuration aircraft also helped.

Konstantin Vekshin, chief executive officer of  Volga-Dnepr Group said the company resumed its Antonov 124-100 operations in 2021, but the fleet of 12’s estimated lifespan of 10-12 years is a concern. “It is a very unique piece of equipment and there is no replacement for it.”

Ethiopian Airlines Group is working with Israel Aerospace Industries (IAI) to launch a B767-300ER freighter conversion line in Ethiopia. Alemu confirmed Ethiopian Cargo also currently has 20 preighters.

Ground handling support with regards to staff shortages and restrictions is a major concern.

Alemu pointed out some airports in Europe have said they will not handle preighters, while US ground handlers also have restrictions.

Hunziker said Chapman Freeborn has faced cancelled flights and delayed cargo clearance from airports of up to five days. “We have very big challenges with preighters especially out of China and Kong Kong both into Europe and the US.” As a result, there has been a shift to Vietnam and Korea, where the company operates preighters long term.

Vekshin added that Volga-Dnepr will await China’s legislation this year following the country’s ban on preighters. “If they’re sticking to their plans that maybe a game changer for the industry, at least for 2022…as it will affect all of us.”

Pharmaceuticals, PPE and e-commerce demand are set to continue to be strong drivers for the air cargo industry, according to Hunziker and Alemu.

Alemu said in the second half of 2021 major trade lanes were China-Europe, China-Latin America and South East Asia–US. The company saw major growth in South East Asia and recorded the largest expansion in Latin America.

Hunziker said growth was recorded worldwide in 2021 with China the driver for this.

Van de Wouw said US growth was up 30% in 2021 compared to 2020 when it was hit hard by Covid. APAC growth remained high in 2020 because of PPE trade, so 2021’s growth was not high.

He explained the Europe to US market is much stronger than from the US to Europe, adding Asia Pacific into the US “dwarfs” the market from the US to APAC.

While continued ocean freight congestion and reduced belly capacity is driving air cargo demand, the industry has no control over these factors, so uncertainty over the sustainability of growth remains, said van de Wouw.

He thinks as passenger demand returns “things will get worse” initially as there will be less room for cargo and pressure for capacity, until flight frequency increases but he doesn’t “see that happening anytime soon”.

Source: www.aircargonews.com

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Around September last year, the air cargo industry was tentatively hoping that the market could be setting out on the road to normality.

Major economies were slowly opening up as Covid case numbers were showing signs of easing and passenger operations were beginning to get back underway as travel restrictions were lifted.

Then November arrived bringing with it the Omicron variant. Lockdowns, travel restrictions, supply chain issues and reductions in bellyhold and freighter capacity on major trade lanes ensued.

Adding to those challenges, the start of the year also sees the industry having to contend with the two-week Chinese New Year holiday, which typically sees a surge of cargo ahead of factory closures, and this year the Beijing Winter Olympics is expected to cause further disruption.

With the year off to a challenging start, Air Cargo News caught up with a cross section of the industry to find out their expectations for the remainder of 2022.

DSV vice president and head of the DSV Air Charter Network, Mads Ravn, tells Air Cargo News he expects a roller-coaster market with Covid continuing to disrupt supply chains, while bellyhold operations will be slow to return.

“Demand will remain strong in every sector and, as the year has already proven, Covid will continue to play a major role in whether capacity will return,” Ravn says.

“Especially on key routes from China and Hong Kong – where they continue to have some of the most severe restrictions – we need some sort of consistency throughout the year.”

He adds: “Belly carriers are trying to piece a programme together with multiple new seasonal destinations that will not necessarily benefit the lack of capacity in the market to and from core manufacturing sites.”

DSV believes that the return of belly capacity to pre-crisis levels is being pushed further out.

“The initial anticipation of 2025 is likely not happening and destinations serviced will change as business travel is very slow to come back,” he says.

“Therefore, we are focusing on maintaining and developing our own DSV Air Charter Network so we can continue to provide as much reliable and flexible capacity as possible for our customers.”

Ravn says handling operations are also likely to come under pressure this year.

“To secure enough people on the ground is perhaps the most severe challenge in several gateways in North America and Europe,” he says.

“This, combined with outdated US infrastructure and lack of staff returning to work, will also influence and slow down recovery.”

Scan Global Logistics (SGL) says it expects the unpredictability of 2021 to continue into this year.

“We expect the market to be pretty much the same as in 2021; travel-restrictions, no clarity about Omicron and potentially other [variants] to follow, and no, or only limited, additional freighter-aircraft to be supplied to the market.

“This will keep constant pressure on the capacities and rates. [Covid] test kits, ocean challenges, airport/ground handling issues etc will remain, leading to increasing charges.”

Looking at seasonal trends, SGL says that the first quarter will remain challenging with rates elevated, the second quarter and early on in the third quarter may see an easing of the situation before the peak season ramps up in mid-September.

On the return of bellyhold capacity, SGL’s global head of airfreight, David Wystrach, says: “Mid-term on this side of the summer, travel restrictions and uncertainty will continue to limit leisure travel.

“Business travellers will not be back to anywhere close to pre-Covid-times. This will limit number of flights and served port pairs.

“Some routes added to the network may be less cargo friendly, e.g. leisure destinations on transatlantic routes.

“On top of this, the current Omicron [variant] will as well impact crews and pilots and with this further reductions on rotations are to be expected.”

Wystrach is also expecting ongoing labour issues across the market to affect ground handlers, forwarders, airlines and trucking companies.

Hervé Bonis, deputy chief executive, Seafrigo Group, says Omicron and seafreight issues will drive demand in the air: “The overall global environment remains uncertain in the first quarter of 2022 due to the high circulation of the Omicron variant of Covid-19 in most western countries.

“This is already impacting on airfreight capacity, especially regarding the China/Hong Kong trade lanes where stringent rules for pilots are in place.”

He adds: “The biggest challenge is definitely to get back to normal regarding intercontinental travel, which then brings back the belly capacity that is not currently available in the market. I expect belly capacity to increase during second half of 2022.

“Regarding our overall volumes, I consider that we will still face seafreight disorganisation, including port congestion, and this will bring opportunity in terms of airfreight volumes.”

Crane Worldwide Logistics chief executive Keith Winters is another expecting labour issues to affect the market.

“There is no question that we are still expecting some turbulent times ahead,” Winters says.

“Currently, with the resurgence of Covid, new vaccine boosters need to be moved and there is still the possibility of borders closing as countries cope with the influx in cases.

“With blank sailings and the Lunar New Year ahead, it’s expected that the first quarter will create more demand which will continue to add pressure in terms of cost.”

On the return of belly capacity, Winters says this is highly dependent on borders opening up.

“We can be hopeful that the new variant will see the end of the pandemic, but there are still so many unknowns,” he says.

“With new aircraft being lined up for charter flights, there will be options, but for now I think we need to look further afield than 2022 to return to what we consider ‘normal’ bellyhold capacity.”

Airlines are also expecting demand to be tight over the coming year.

Roger Samways, vice president commercial, American Airlines Cargo, says that despite some return of passenger flights, indicators suggest that demand improvements and congestion in other modes will contribute to capacity shortages in air.

“Continued capacity shortages in the market, relative to demand, as well as infrastructure challenges at airports, will present ongoing challenges for the air cargo industry,” says Samways.

“We have faced capacity shortages since the start of the pandemic, but we’ve seen innovative, creative solutions across the industry as carriers have tried to support the needs of our customers.”

Samways adds that belly capacity will improve in 2022 compared with last year but won’t get back to 2019 levels due to changing government travel restrictions and possible future Covid-19 outbreaks.

“Our current expectations are that widebody capacity will grow around 20% compared to 2021. The key for our cargo customers, though, is where that capacity is going to be deployed.

“Unlike in 2021 when many of our widebody aircraft were operating on short-haul leisure markets, such as the Caribbean and Mexico, in 2022 our widebody fleet will primarily be deployed on long-haul international markets which is great news for our cargo customers.”

Charter outlook

Charter brokers are also bracing for another busy year. Dan Morgan-Evans, group cargo director at Air Charter Service (ACS), says the disruption experienced over the last couple of years has been too great to unwind completely during 2022.

“The longer time goes on, the more balanced it will become but we are still seeing very strong demand in the short term and long term, with a record number of forward bookings even into 2023,” he says.

“The whole supply chain has changed over the past two years and, unless we suddenly revert to pre-pandemic passenger numbers and all travel restrictions are lifted, then we will continue to see strong demand.”

He says that ACS was previously used to seeing single ad hoc flight bookings with the occasional programme for multiple flights. Now, the company is seeing bookings that are predominantly programmes.

“The challenges will be similar,” he adds. “Covid restrictions, lack of capacity, bottlenecks at airports – but these are all the benefits of using a company like ACS.

“The marketplace is complicated. Whether that’s the aforementioned, or people out there trying to take advantage with phantom aircraft and fictitious contracts.”

Neil Dursley, Chapman Freeborn chief commercial officer, cargo, says the continued impact of Covid-19 shows little sign of slowing down and there is no return to “business as normal” insight.

“What we are seeing in the first weeks of this year is ‘more of the same’; a distinct lack of widebody availability and supply chain challenges impacting the major ocean ports of the world with new restrictions due to new Covid outbreaks in strategic ocean ports. This continues to force more and more cargo into the air.”

Dursley adds that there has been a surge in demand for Covid test kits. The broker has just completed “an enormous programme of flights” utilising multiple AN-225 and AN-124 flights, including on Christmas day.

“Never before in our history, or I believe in the history of the AN-225, has it ever operated so many back-to-back missions,” Dursley says.

“The good news for our clients is that pricing on widebodies from Asia to Europe, as well as transpacific routes, has reduced in January vs December, but we anticipate that this will again increase following the Chinese New Year.”

He adds that freighter operator Magma Aviation, a Chapman Freeborn Group subsidiary, continues to operate at full capacity to and from a range of origins.

He says: “Restrictions on crew due to Covid outbreaks in key locations is creating issues but ones which our partners are supporting so that supply chain continuity isn’t impacted.”

Looking at sectors driving demand, Dursley says that the company is heavily involved in humanitarian related movements for vaccines, test kits and emergency supplies.

“Likewise we see increases in automotive, hi-tech and oil & gas related activities.

“We have continued long-term programmes of e-commerce related movements using passenger-cargo aircraft as well as full freighters utilising both group assets and many third-party airline partners.

“So this storm rages on and with it we are expanding rapidly and recruiting currently over 100 full time employees to support our clients as well as opening up multiple new offices around the globe.”

Navigating the challenges ahead

With another year of disruption and unpredictability ahead, what steps are companies taking to try and navigate the challenges that lie ahead?

Crane Worldwide Logistics’ Winters says that close collaboration, information sharing and flexibility are key to managing the current market conditions.

“It takes all key members of the supply chain to work closely with clients, manage expectations and find solutions that will work in the long term.

“Supply chains are being reassessed by many organisations and are also at the top of priority lists in 2022.

“There is evidence that companies are reverting to nearshoring, alternative routings, transportation switches etc.

“We believe that working together closely with our clients, we can bring the expertise needed to provide solutions, not only the urgent situations, but also in the long term.”

He says these solutions could be additional charter capacity, extra 3PL warehousing or alternative methods of transportation such as rail freight.

Ravn of DSV says that forwarders will need to invest in their own controlled capacity to add some consistency and longevity for customers that commit to capacity and rates.

“Most air carriers have become transactional during last year and there is an intense battle to secure the best commitments in the market,” he says.

“It puts clients, who have been consistent supporters on particular lanes, in a very [difficult] situation, hence they are turning to forwarders like DSV with own controlled charters to leverage their spend, which is often connected to other parts of the supply chain.”

From an airline perspective, Samways of American says that the airline has learnt to expect the unexpected.

He agrees that collaboration across the supply chain is key to managing the situation.

Samways says: “From an industry perspective, increased investment and closer working relationships with industry partners will be important in helping to ensure that we are able to operate efficiently and accommodate as much cargo is possible.”

He adds: “For American, that has included working with our network planning team to help ensure the rebuilding of our widebody network meets both PAX and cargo needs and looking at how we can best utilise our existing narrowbody and trucking networks to help bridge routes and create more options for customers.”

He adds that the airline has already made plans for nearly all its widebody fleet to be dedicated to long-haul international routes, which is ideal for the cargo division.

The company is also poised to take delivery of more than 40 Boeing 787 aircraft over the next few years, which Samways says will help to support further capacity growth across American’s network.

Wystrach of SGL says that it is important that forwarders remain very proactive and that customers keep a high focus on their approach to planning.

“Keeping up with constant schedule changes, impact of airport/port congestions etc., will require an ongoing agility and solution-driven attitude,” he says.

“This will continuously require flexibility for forwarders and customers in regards to pricing, transit times and routing opportunities.

“Constant proactive communication, including offering multiple solutions enabling our customers to make a conscious decision on how to balance cost and supply chain risk, is and will remain a key priority for us.”

Source: www.aircargonews.com

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In his speech, Soren Toft explained MSC’s views on the status of decarbonization in the container shipping sector, summarized how the company is approaching this challenge and commented on how everyone must move forward together in collaboration to tackle climate change.

As shipping volumes have grown over the years, so have the environmental emissions produced as a by-product of delivering goods around the world. Container lines such as MSC must continue to do their part to help mitigate the impact of climate change while continuing to operate responsibly in meeting the ever-increasing demand for global trade, Toft said, “It is critical that our priority this year is not only to respond to the huge demand we are experiencing in the very complex, congested markets that emerged amid COVID, but also to ensure that we do not decouple this from our efforts to decarbonize.”

Toft said collaboration is key to achieving the decarbonization goals set out by the shipping industry, and noted MSC already fosters industry-wide, as well as cross-sector collaboration to enable the massive required investments. While the company continues to invest in low-carbon technologies and explore different fuel options, carriers in general continue to struggle from a lack of solutions available at scale, the CEO said.

With the total cost of decarbonizing shipping estimated into the trillions of dollars, carriers must make expensive capital decisions that will live on for decades. Urgent investment and a better understanding of how business and society will share the cost burden is also required, Toft said.

Soft emphasized that “the transition to a low-carbon economy requires broad collective action and productive partnerships with our stakeholders across and beyond shipping.”

“By cooperating and collaborating with others, we will capitalize and build on the interdependencies between ocean-going and inland logistics as well as other sectors providing fuels, distribution systems and infrastructure,” he concluded.

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For example, a computer chip shortage had a knock-on effect across many industries. Concerns have also been raised about everything from lithium supply for electric vehicle batteries to restaurant food supplies to even coffee shortages.

Never has the issue of supply chain management been so prominent. The question now is what challenges supply chains face in the year ahead. So what can we expect?

Complex, fragmented, under pressure
Products reach consumers through a chain of companies involved, which typically includes manufacturers, logistics firms – who provide storage, distribution and transport – and retailers. Not surprisingly, the whole system is highly complex.

There’s a whole philosophy of contemporary supply chain management (SCM) concerned with making supply chains much more integrated than they used to be. Done well, it can significantly improve the overall performance of companies, as well as benefiting the economy and society. Yet this long-term effort to make the whole system more efficient has been set back by a whole host of challenges in global supply chains.

Three big issues became particularly apparent in 2021. First, and probably the most obvious to many of us, was the unprecedented pressures on global supply chains created by the COVID pandemic and the subsequent series of lockdowns and restrictions which varied in their timing and severity from country to country.

This has resulted in significant geographical shifts in supply and demand, which in turn has created problems for finely tuned global supply chains. Trends that were apparent pre-pandemic, such as increases in online shopping and driver and other skill shortages, are now causing real problems.

Second, the economic and business environment became more challenging. For example, in the UK and the rest of Europe, supply chain pressures were caused by Brexit as a result of increases in red tape and cross-border checks. More widely, firms continue to grapple with a range of international business challenges ranging from fluctuating exchange rates to the building of global management teams.

This all matters because business has become increasingly international – often global – in recent years. This is thanks to the reduction of traditional barriers to the cross-border movement of products, services, capital, people and information. The impact of this change on logistics and SCM is the subject of my book Global Logistics: New Directions in Supply Chain Management.

Third, the environmental impact of logistics and supply chain activities is beginning to be more widely understood. If countries around the world are to meet their emissions targets and commitments, it is key that they develop more sustainable supply chain practices. Glasgow’s COP26 in November had a strong focus on transport including freight and logistics. Business as usual is simply no longer an option if a sustainable future is to be achieved.

But uncertainty is a characteristic of the international business landscape in which supply chains operate. As a result, major companies have become strongly focused on supply chain risk management. This means identifying where risks of any kind exist in the network, assessing the potential impact of these risks, and putting mitigation strategies into place. A range of formal methodologies and tools have been developed to support this process.

The big question is how all this complexity can be handled, particularly in terms of design, planning and execution. These challenges are new in many respects, so past experience cannot be relied upon to generate solutions.

An unpredictable world
So what kinds of things are going to affect global supply chains in 2022? As The Economist neatly put it recently, “the era of predictable unpredictability is not going away”.

The arrival of omicron has provided a timely reminder of the unpredictability of the pandemic. The emergence of new variants during 2022 could accentuate some of the current pressures. In this context, China’s continuing zero-COVID strategy with its tight border restrictions could create problems.

Despite some easing in recent months, international shipping costs are likely to remain high in 2022. Closer to home, the arrival of the full post-Brexit customs checks introduced on January 1 has introduced further friction and added costs, with many firms reporting a worrying lack of preparedness.

Above all, freight transportation and supply chain processes will continue to change during 2022 as more environmentally sustainable practices are adopted. These practices affect everything from transport vehicles, such as switching to electric delivery vans, through to changes in the wider supply chain, such as relocating distribution centres to minimise distances travelled.

Industry and academia are collaborating to develop innovative and sustainable practices, as can be seen in the work of the Centre for Sustainable Road Freight, for example. The year ahead will be key in the adoption of these practices, each of which requires change in the operational practices of firms. Such change will inevitably create short-term challenges as the new practices become embedded.

Business has to be resilient and capable of adapting to major disruptions so that it can develop long-term strategies and solutions to these complex challenges. In the meantime, shoppers are likely to see higher prices, with companies passing on increased shipping and other logistics costs to customers. We may continue to notice things missing from our supermarket shelves – new year product shortages are already being reported in some countries. So as consumers, we are going to have to keep being a bit more resilient ourselves.

The author
Edward Sweeney is a professor of logistics and supply chain management at Heriot-Watt University.

Source: www.marinelink.com

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