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

Image: www.pixabay.com

The post The Big Challenges for Supply Chains in 2022 appeared first on Cargo News Today.

As 2021 draws to a close, forwarders and their customers are staring down one of the most stressful business environments in recent memory.

However, despite pandemic-driven changes to cost, capacity and transit time, forwarders will never have a more prominent opportunity to demonstrate their value and fundamental role within the supply chain.

For months, major ports in the US have been making headlines for extreme and unrelenting maritime congestion. Goods manufactured in Asia are arriving to miles of backup at US ports, as the average waiting time from arrival to a berth has crept up to 18 days.

On land, scheduling delays caused by cancelled sailings, tight container availability, chassis shortages, port labour challenges, and unsurpassed high rates are dominating customer conversations more than ever.

As a result, expectations of predictable scheduling and rates have become a thing of the past and forwarders are feeling the stress of the unrealised expectations.

Recently, President Biden announced the success of proactive initiatives by his administration, pointing to a 16% surge in port productivity.

These measures include increasing the opening of maritime terminals to 24 hours a day, seven days a week, a $100 discount for container recoveries from an ocean carrier, and significant retailers removing containers to inland staging areas.

This proclaimed success however, may be more optimistic than factual. In a recent Airforwarders Association survey, almost 50% of responding organisations said the measures by the White House have had no significant impact, finding port congestion worse than ever.

About 30% reported that there has been some positive, but primarily immeasurable, effect on container availability and waiting times.

What has been less reported but is also detrimental to the supply chain is the similar state of play at airports.

About half of survey respondents reported that freight area congestion at airports is easing, but only by a small margin as airfreight truckers are reporting waiting times that often exceed four hours at major gateways around the country.

These issues have been compounded for ground handlers who are struggling to manage the unceasing cargo volume.

Companies are struggling to recruit and retain eligible workers to fill ground handling roles due to the competitive labour market. Then, many of the applicants who pass rigorous security requirements are unwilling to wait for their paperwork to be processed, which can take three or more weeks at major airports.

Alleviating the Burden at Airports

The White House can take action to reduce the severity of the congestion issue now by delaying the implementation of Executive Order (EO) 14042, “Ensuring Adequate Safety Protocols for Federal Contractors.”

Throughout the pandemic, forwarders and vendors have been considered “essential workers” to provide critical supply chain support for US persons, organisations, and the federal government.

These forwarders have successfully provided essential services by strictly adhering to Center for Disease Control and Prevention and Occupational Safety and Health Administration guidelines to maintain best practices throughout their facilities nationwide.

However, forcing the industry to comply with the mandate within the EO, which requires federal contractor and subcontractor employees to be 100% vaccinated, will only create more hardship on an already constrained labour force.

The matter of adequate airport warehousing space, a concern even before the pandemic, has become more severe than ever before.

Handlers are reporting that facilities away from the airport are also at capacity since cargo owners, faced with a similar challenge, cannot accept shipments.

This problem leaves forwarders with little choice to keep freight at the airport, regardless of the resulting high storage fees assessed.

Compounding this issue, a recent mandate requires that 100% physical screening of cargo flown on international freighter flights.

As implementation of this mandate is rolled out, it is vital that regulatory organisations like TSA continue to collaborate with industry to ensure mutual understanding of goals, policy and procedures.

This kind of combined effort led to programmes such as the Third-Party Canine Cargo Screening Program, which have been crucial in performing more efficient and streamlined inspections.

The outlook for 2022 remains uncertain. The emergence of the Omicron COVID-19 variant has caused experts to question projected progress towards global recovery.

If countries impose new lockdowns, for example, we can expect greater stress and significant problems for the already oversubscribed supply chain.

Even so, forwarders have demonstrated tremendous resilience, flexibility and commitment to delivering for their customers throughout the pandemic.

Though this may be the most stressful period for the supply chain recent history, it also presents a unique opportunity to create a more efficient and cohesive shipping community.

By employing consultative and collaborative approach, forwarders and stakeholders throughout greater supply chain can continue to create a better understanding of siloed processes, develop creative solutions to complex logistical challenges, and provide superior service now and in the future.

Source: www.aircargo.com

Image: www.pexels.com

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