Global supply chain issues such as port congestion and container shortages have been key factors behind the recent surge in inflation. They have pushed up transportation costs, resulting in higher prices for the end buyer, the consumer.
In addition, global supply chain issues have caused delays in product delivery, adding to inflationary pressures.
Initially, economic observers, including the Federal Reserve, believed the global supply chain’s problems were temporary as the supply side of the global economy was unable to keep up with the increased demand sparked by the end of the pandemic lockdowns . As a result, the Fed and other central bankers around the world have been reluctant to take action on inflation.
But the supply chain problems were not temporary. Problems in the global supply chain continued well beyond the end of the pandemic lockdowns.
“More than two years ago, we experienced something unprecedented when the global supply chain came to a complete standstill, the impact of which has been lingering for a long time,” Sateesh Seethamariah, CEO of EdgeVerve Systems, told the International Business Times in an email. “While supply chain issues began with COVID-19, this has been amplified with increasing consumer demand for certain products and has cascaded into other product categories as the pandemic and buying behaviors have evolved over the past few years.”
What about recently? Will the global problems in the supply chain be solved? Experts are divided.
Seethamariah claims they are easing, pointing to several supply chain indices that have declined recently.
“Oxford’s US Supply Stress Index and Global Supply Chain Pressure Index GSCPI have fallen for three straight months, indicating a trend reversal,” he said. “Even the Baltic Exchange Dry Index has shown pressure reducing the cost of shipping goods around the world Chain issues are easing after the pandemic and the worst is behind us. Although we are still in the early days, it looks like we have We’ve turned the tide for the better as we’ve seen congestion in ports ease and retailers have started to report more. Even consumer confidence and demand-side spending are improving.”
Shanton Wilcox, head of US manufacturing at PA Consulting, believes supply chain problems are not abating. Instead, they were overshadowed by media headlines about inflation and gas prices. He cited UK auto sales as falling 9% in July, while Toyota and Lucid cut production targets due to supply chain issues including plant closures in China and ongoing chip shortages.
“The chip shortage also caused Nintendo to miss its forecast for the Switch console,” Wilcox said. “There are warnings from Florida utility companies that recovery from a hurricane this year could take months to even a year, as manufacturers of transformers and other components have historical backlogs and even declining orders.”
Faidra Papailia, CS&L Retail Supply Chain Coordinator at Mondelez International, expects 2022 to be a challenging year for the supply chain on a global scale.
“Regarding the food industry, the COVID pandemic and the conflict in Ukraine have had a negative impact on sourcing, production capacity and logistics,” she said. “While the food giants have been quite agile in adapting their supply chain to the new standards, they still face major challenges and I would say a full recovery is not expected before 2022.”
Bill Catania, the CEO of OneRail, took a similar position as Papailia.
“This year there’s going to be some sort of peak and sort of gap between supply and demand,” he said. “Even if e-commerce is slowing down, it would be foolish to prepare for a slowdown. You’ll still see that climb that we’ve come to know and love over this November-January period. I don’t think we’re immune to this uptrend because there’s been a slight slowdown in a 50% growth streak.”
What about price pressures on critical products like food supplies? Papailia considers the market too volatile to predict the near future.
“Commodity and transportation prices have increased significantly in recent months, which poses major challenges for the food industry,” she said. “But I would say that the market is still quite volatile to draw any concrete conclusions about price development for the next quarter.”
https://www.ibtimes.com.au/are-global-supply-chain-issues-easing-1837677?utm_source=Public&utm_medium=Feed&utm_campaign=Distribution Will the global supply chain problems be solved?