Over the past few years the world has experienced drastic changes as a result of the COVID-19 pandemic. Various industries have had to adapt and pivot to adjust to the new global environment. One industry in particular - supply chain - has dealt with enormous change from dealing with staffing shortages, delayed shipments, pricing spikes and more.
Many businesses are grappling with these questions and looking ahead for what’s next. We’ve tapped a number of expert thought leaders from among our clients to weigh in with their predictions for the state of supply chain in 2022, to help you prepare and gain an understanding of what you might expect.
Ambrose Conroy, Founder and CEOSeraph, a supply chain/manufacturing turnaround consultancy
2022 is going to be an especially brutal year for businesses worldwide due to supply chain chaos. The wage arbitrage, delivery certainty and low logistics costs that are the backbone of almost all developed countries’ manufacturing and consumer products sectors have become constraints. There will be growing shortages of everything, including automobiles, consumer products, pharmaceuticals and white goods. Adjusting supply chains to the new global reality will take years.
Companies can, however, take action now to improve their supply chains moving into 2022 and beyond. First, we all need to acknowledge that inventory is a good thing, and inventory buffers are essential. Look at resourcing components to the region where the customer base resides. Launch an active supply chain risk assessment to identify the most critical supplier, components and regions, and establish a war room to track the ever-changing nature of the supply chain battlefield.
Evan Pohaski, Founder and CEOJLE Industries, one of the fastest-growing logistics companies in North America
The ability for the Truckload sector to expand capacity will be severely limited in 2022. Normal equipment replacement schedules for tractors and trailers have been out the window for three quarters now as OEMs continue to arbitrate the chaos in parts and production labor. By extension, the reliability of ordering new growth equipment has become as speculative as purchasing out-of-the-money call options that expire next week. Presuming equipment markets corrected themselves, the Truckload sector in aggregate may still be unable to hire enough labor to meet demand in 2022 as evidenced by the fact that more CDL operators are either leaving the industry on their own accord or being temporarily or permanently suspended by regulation. All this will lead to another round of profound increases in truck transportation rates in 2022 that will reverberate through the entire supply chain, accelerate inflationary cost pressures, and keep American business owners awake at night. Add in the scramble underway as producers, shippers and retailers attempt to unpackage the $1.1 trillion dollar infrastructure bill and we are left with great uncertainty in the ability to underwrite anything beyond tomorrow.
Every business is now a people business. At the frontal cortex of any leader in supply chain must be workforce stability and talent pool management. This is as true for any business that directly relies on the Truckload sector as it is for the Truckload carriers themselves. Strategize NOW about how we can ensure our workforces remains engaged and committed. Communication is more important than money as is finally accepting the fact that COVID-19 has changed everything and now employees have even greater expectations of their employers than ever before. Think tactically – where can technology unlock productivity in our current processes and workforces? Any system that relies as heavily on people as logistics is prime for the application of technology. Lastly, remain financially flexible and do not manage the balance sheet passively. This will change fast.
Graham Scott, Vice President of Global Procurement Jabil, Inc., a global manufacturing solutions provider
The pandemic continues to cause disruptions across every node of the supply chain—the components market is no exception. The pandemic spurred a growth in demand that was so remarkable and unpredictable that the supply chain breakdowns cannot be fixed until that demand plateaus to a more manageable level. While demand for all commodities initially cratered with the onset of COVID-19 and the shutdown of factories, the global economy's V-shaped recovery has driven an unprecedented need for semiconductors that suppliers have simply been unable to meet. As a result, we are dealing with chip shortages, severely extended lead times from analog suppliers and massive pricing spikes. Risk has been elevated to unparalleled levels at all parts of the semiconductor supply chain. Accounting for market data and conversations with customers, we expect the basic semiconductor market to be in short supply through at least the first half of 2022; for complex semiconductors, the market will be tight through all of 2022. There has simply never been a higher demand for semiconductors.
There are no quick fixes to a depleted supply of semiconductors and high prices when every company is in the same boat. There are several steps business leaders can take now to ride this out and prepare for the next disruption:
1. Provide as much visibility as possible to your supplier partners. This way, they can plan their product capacity and any potential longer-term capital investments. Some suppliers are looking for 12 to 24 months of visibility. In an effort to provide supply continuity, some analog chip suppliers are encouraging customers to place long-term orders through the end of 2022 and into 2023 to enable better visibility for wafer and capacity planning.
2. With lead times moving out across most commodities, update your planning systems to reflect the new lead times immediately, as pull-ins and support for unscheduled orders will be very difficult.
3. Make sure your company’s product design teams continue to stay aligned with your suppliers’ technology roadmaps and capital investment plans. This will give you a greater chance of getting the components you need when you need them.
4. Wherever possible, qualify multiple suppliers for common products, and continually review new suppliers as they expand their product portfolios and capabilities. In addition, as part of the qualification process, review and monitor suppliers’ global footprints to mitigate concentration from any one country or region.
Sanjay Sharma, Chairman and CEO
Roambee, a supply chain visibility technology company
Real-time, end-to-end supply chain visibility is imperative for meeting the challenges of the current supply chain crisis. Most current solutions are semi-automatic in nature, for example, take the Suez Canal blockage fiasco: disruption was detected but not much could be done. To extend this example, take the case of a perishable container that was stuck in the Suez Canal; the shipper would know of the spoilage risk but would be blind to the potential total impact on the network. By expanding and improving visibility, knowing that, say, the 25 containers of avocados are going to be spoiled, the shipper can propagate this impact and forecast if there is going to be scarcity, price rise, unavailability for months, and/or impact on other products that use avocado as a raw material such avocado oil. There are a number of new companies on the rise as we move into 2022, developing visibility platforms that take sensor and non-sensor signals and translate those into the total impact on the ecosystem, not just one customer or one product but across all products, all customers, countries, labor markets and more.
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