• A reset for the global supply chain? What to expect as we enter 2022

 

Ian Nethercot, MCIPS supply chain director, Probrand, shares the major developments impacting IT buyers in the early part of 2022.   

What do turkey, toys, and tech all have in common? They’re all facing shortages due to the increasing strain on the global supply chain. Even Father Christmas may not be able to get his hands on stock this year as both business buyers and consumers continue to feel the effects of soaring shipping costs, the ongoing impact of the pandemic and the aftermath of Brexit.

Shipping costs are still too high – but no longer soaring

Shipping costs skyrocketed this year – and at points were five times higher than in 2020. Things got so bad that the UK’s Competition and Markets Authority had to step in to put pressure on shipping lines to justify their prices. It looks like this has given shipping lines the scare they needed with costs now starting to drop and container costs currently down by approximately 30% from a few months ago. 

A major movement which may help ease this situation in the future is increased capacity – and many shipping lines are currently building ‘super ships’ which will hold some 20,000 containers. In the short term, however, things are heading in the right direction. Costs remain high but they are likely to settle down by the middle of Q1 next year. 

Pallets are the new containers

While container costs are beginning to stabilise, we are starting to see one problem being replaced by another. Constraints and congestion continue to slow everything down as we try to get goods from A to B – and that’s having a knock-on effect for pallets, which are not being returned into the system quickly enough. 

This is being exacerbated by a shortage of raw materials, which is hampering pallet production. The price of wood has soared throughout the pandemic as it continues to be in short supply – the cost of timber jumped 23 per cent between June – July, 2021.  

Catch up over Chinese New Year

Chinese New Year, as usual, will have a significant impact on the supply chain – with factories shutting for as long as a month. This annual occurrence tends to result in frustrating hold-ups which international buyers are forced to work around. And yet, this year, the break may actually be viewed as a good thing – as it will provide a chance for things to reset. 

Currently, ports continue to be congested. A few weeks ago, for example, we heard reports that 68 ships were anchored at sea while waiting to get into one of the busiest ports in LA. These types of events have meant that around 13% of global cargo shipping capacity is tied up. So just bear in mind that, on average, this means every 8th order you – and everyone else – places is likely to be delayed.

This congestion doesn’t just mean that products are delayed for a few days either – the reality is much more dramatic. When timetables are askew ships can end up being in the wrong place, and so on. Having a break over Chinese New Year, however, will likely allow the supply chain to catch-up – and, hopefully, this will enable things to flow more smoothly again. 

Looking forward

If 2021 has taught IT buyers anything, it’s that they need to be prepared for the unpredictable. Of course, being aware of current ups and downs helps enormously and buyers should continue to stay in regular conversation with their suppliers to anticipate possible hurdles before they arrive. 

It may be that things will not arrive in time for Christmas, but it’s crucial that buyers are still putting those orders in to ensure they are getting IT supplies into the business as quickly as possible. 

By taking the appropriate steps, procurement teams can start 2022 safe in the knowledge that – regardless of what the supply chain throws at them – they are doing everything they can to remain agile. 

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