Top Trends Impacting Global Supply Chains in 2022
The business landscape today no longer sees a reliable supply chain that handles the movement of materials and goods at an efficient pace. Shortages and long lead times are apparent in almost every retail industry. Prior to the crisis and Covid-19 pandemic panic buying, most consumers did not think of the supply chain when buying goods. But now, the supply chain is in the mainstream news cycle and a part of everyday conversation.1
For managers and companies alike, this wave of change means new strategies and methods of operations. Some say that supply chain management has fundamentally changed. The past two years have shown what happens when global production slows down at the same time a deluge of government-provided money flows into the hands of consumers and businesses that spent it. This caused the US, in particular, to go through trillions of dollars of inventory while domestic and global production was shut down. As demand grew faster than supply, retailers went through their inventory in an attempt to keep up.
Pandemic Effects on Supply Chain
The pandemic has tested the commercial, operational, financial and organizational resilience of the majority of companies across the globe. CEOs are looking to address resilience gaps when it comes to disruption and innovation, with 67 percent saying they will increase investment in disruption detection and innovation processes.2
Production delays during Covid-19 have become headline news. Manufacturers are competing for a limited supply of key commodities and logistical capacity, leading to consumers experiencing empty shelves and long purchase lead times. However, it's not all doom and gloom. The pandemic has intensified the focus on supply chain evaluation and evolution. Industry is evaluating and investing in their long-term supply chain strategies, particularly in areas well suited for innovation like Latin America, paving the way for a new post pandemic normal.
The days of buffering inconsistent supply with excessive inventory at the lowest purchase cost are quickly becoming a relic of the past. Manufacturers are evaluating risk first as a key decision point in their supply chain development.
Through awareness, and necessity to maintain a competitive edge, industry is being propelled to address many long-standing supply issues, re-engineer products' specifications, leading to more resilient and cost-effective supply chains that can position their respective organizations as leaders in this new normal.
5 Trends Impacting Global Supply Chains
As the effects of Covid-19 continue to impact the global supply chain, how should businesses seek to build resilience into their supply chains moving forward? Below are some of the major disruptions affecting supply chains and strategies that are being rapidly deployed by leading organizations to help build resilience and agility.3
1. Logistics Disruption: The ongoing global logistics disruptions stemming from the pandemic continues to impact businesses and consumers as the flow of consumer goods into key markets such as North America and Europe, South East Asia and India is restricted by the continued shutdowns of major global ports and airports, largely in China, South Korea, and the US.
The major logistics disruptions create a ripple effect across global supply chains that ultimately cause goods to pile up in storage, impacting those ships on their way to ports through diversion or being slowed down as they arrive at major transit hubs, thereby restricting global trade flows and limiting access for businesses to import products and refill their stocks of inventory.
Assuming these disruptions recede and access to sea and airfreight reverts back to pre-pandemic levels, it will likely take some time before things simply return to normal. In the interim, you should expect to see higher prices (as excessive freight costs are passed onto the consumer), and longer waits for retail shelves to be replenished (especially imported products). Consumers should reset expectations, as items requiring repairs and maintenance could also be delayed in lengthy service queues.
Government and industry leaders are seeking to define strategies that build resilience and boost our domestic capabilities, thereby becoming less reliant on regional and global supply chains. Companies should look to identify alternative supply chain flows, inventory storage capabilities closer to their customers, and determine how to best enhance last mile deliveries and returned goods. Exporta Wholesale can assist in all three ways.
2. The Rise of E-Commerce: The rise of e-commerce is perhaps the most obvious and commonly understood force affecting today’s supply chains. All around the world, warehouses are jam packed — some even have products piling up outside their doors. In fact, this incredible demand squeeze represents the longest ongoing expansion peak in five years. E-commerce and omnichannel fulfillment will continue to shape the way organizations identify and establish key priorities, creating challenges with regards to scale and network efficiency while producing new opportunities to gain competitive advantage.4
U.S. eCommerce growth has returned to pre-pandemic levels – but delivery volumes are high as ever. To boost efficiency across supply chain operations, reduce logistics costs, and keep customers satisfied with on time delivery, businesses must reevaluate their operations and embrace growing trends in supply chain and logistics.5
3. Technology Investment: Go-to technologies in the supply chain changed quite a bit in the last two years, with managers investing more strategically and becoming less shy to new technology. Machinery, hardware and software are all looked at in a different light today. The supply chain was built on legacy technologies that previously lacked the ability to interact with other, newer technologies. But now, visibility is key.
The initial investments made in the previous 18 months by many companies were aimed at automating key nodes within the supply chain (such as intelligent automation used to enable efficient, effective and safe operations) including stores, warehouses, manufacturing facilities and even corporate office buildings.
One can observe that many supply chain managers are currently troubled by a lack of visibility throughout their extended supply chains, as there are so many nodes and participants within the extended chain. Leading organizations are using advanced technologies to significantly improve visibility and thereby become far more responsive to major disruption and variability within their domestic, regional and global supply chains.
4. Commodity Pricing: Today, supply chain and procurement professionals are expected to have much more knowledge of categories rather than just being negotiators. A deeper understanding of commodities helps in leveraging the necessary levers and understanding the right price of purchase.
Spend transparency remains poor. While the category price is available, the detailed break up of price in terms of the material component, wastage, conversion, labor, and premium added are not defined. Often category pricing is not indexed to the basic commodity price, which has produced cases where the category prices don't move in sync with respect to commodity pricing, for example the pricing of paper-based packaging such as corrugated boxes - very few organizations have a scientific way of indexing prices for these items. In many organizations, commodity purchase decisions are more based on experience than based on a structured mechanism. Timing of purchase and quantity becomes crucial while making these decisions.
To overcome this, teams are focussing on digital transformation and technology - seamless flow of information across value chain and insights delivers faster decision making. Organizations are leveraging spend analytics tools and software packages to increase visibility of where, how and when they spend. Consolidation of spend enables improved buying leverage and negotiating power to help drive value or push for improvements.
5. Workforce and Labor: The Covid-19 period has been riddled with uncertainties and labor market shortages have further complicated post-pandemic recovery scenarios for many industries. The shortages are for both white and blue collared workers alike in terms of both skills and numbers.
Modern operations are focused on technology and innovations, and as a result, supply chains are becoming more complex. With this, the boundary between blue collared and white collared workers is diminishing. Technology cannot operate in silos and it needs workers equipped with the right skills and capabilities. Hence, supply chain and manufacturing operations need a blend of both physical and technological skills to sustain and grow at present and in the future.
The changes in the demographics are also impacting the overall resource pool. Organizations should rethink their approach to recruit and engage Gen Z, who will increasingly become part of the active workforce in the near-future. The motivations and aspirations of new generations should be considered to keep the younger cohort of workers inspired with a purpose.
Since the supply chain grows in complexity, deeper partnerships become more important. Organizations that invest in long-lasting partner relationships have a better chance at managing the crisis better than those who continuously went shopping on spot markets. An important part in strengthening supply chain relationships is extending visibility to partners. Additionally, collaboration in innovation can be another helpful tool in a flourishing supply chain partnership.
At Exporta Wholesale, we can help you build long-term partner relationships with trusted suppliers across Latin America. The future of the supply chain could look very different than the one we see today and hopefully soon, there will be less shortages and disruption. However, we’re excited about the transformation and progress made in Latin America manufacturing, which is resulting in a more resilient and stronger global supply chain infrastructure.
Exporta Wholesale professionals work with clients to develop detailed supply chain strategies. These strategies facilitate full gap analysis and implementation of tested approaches through integration of target operating models. Strategic elements include evaluation and recommendation of alternate sourcing markets, inventory reduction strategies, service level up time improvements and adopting strategies that build in supply redundancy and incentive-based supplier performance criteria.
Our platform is an outcome-driven solution designed to support your organization in addressing the challenge of organizing a complex, dynamic supply chain. It helps you to better meet the demands of customers and respond to market changes, while striving to maximize efficiency gains both now, and in the future. A helpful jump-start to your digital transformation, enabled by technology and real-time insights.
About Exporta Technologies
Exporta Wholesale is the largest marketplace connecting suppliers in Latin America with buyers in North America. Today, we have a network of over 5,000 Latin American suppliers serving a variety of consumer goods and product categories in the United States.
Exporta’s marketplace offers buyers a full service experience in the origination, sourcing and managing of products. The platform was founded on the idea that curation and service are the most important elements in the buyer’s journey. Exporta’s marketplace is building technology that addresses the pains of sourcing products internationally at attractive prices.