New Year, New Hope: What should freight forwarders prepare for in 2022
The New Year might feel like a repeat of what we saw in 2021. The new variant Omicron is surging across nations crippling healthcare, keeping employees away from work and forcing new restrictions and lockdowns. While the problems might be similar, but this time around freight forwarders seem to be better prepared.
The decision makers in the supply chain industry have been concerned about various issues but this time around they seem to have a solid strategy to reduce the impact on global supply-chain industry.
Let us look at some of these issues and how prepared are the freight forwarders this year.
China continues to be the global manufacturing hub and any COVID induced disruptions will have a far reaching impact across the world. China’s long standing, Covid-19 zero tolerance policy, means stricter measures like lockdown and longer quarantine periods. Yantian Port and Hong Kong are already facing restrictions. The quarantine periods for Chinese crew are the strictest in the world with around 35 days in various levels of quarantine. The government will not relent anytime soon considering the Chinese New Year and Beijing Winter Olympics are round the corner.
The supply chain industry has suspended the South China Feeder service since end of December and is likely to continue till end of February. Similarly, ocean carriers like Hapag-Lloyd, CMA-CGM, and Ocean Network Express (ONE) have stopped accepting shipments, normally raw material, destined for the region. This might have a domino effect in Europe and USA as the manufacturing is likely to be hit, however ocean liners seem to be prepared to tackle the situation with alternate routes that will have a lower impact on the overall supply-chain situation.
While the China is the manufacturing hub, USA continues to be the largest consumer of the imported goods. With cases surging in the US, another problem that freight forwarders need to deal with is the labor shortage.
The supply chain industry is aware and geared up for higher container charges, however what needs to be seen is the impact of disruptions caused by labor shortage. With US topping 1 million cases recently, a large section of labor – mainly truckers, ground staff at port etc. are likely to be away from work. A combination of systems like keeping omni-channel supply open, capacity building, increasing recruitment, shipping from local facilities etc. will help the industry tide over the situation in the near future. High rate of vaccinations has also helped in lower hospitalizations and milder symptoms.
Container shortage will be something that will continue to be a sticking point for most of 2022. Though the rates of the containers had somewhat flattened, bottlenecks in the eastbound trans Pacific Ocean trade led many shippers to consider air transport. More than 78 million kg’s of auto parts were flown across the Pacific in the first 10 months of 2021, along with huge quantities of footwear and apparels.
Both shipping lines and air transporters are considering alternate routes to avoid congested ports. Similarly, they are also relying on digital transformation to aid their growth. In current times, supply-chain companies are using satellite data and analytics to make intelligent decisions, identify congestions and work around them to ensure no delay in delivery. Such measures will help rein in the container shortage and price.
Manufacturing Strategies to Cope with fluctuating consumer demand
The earlier waves showed the huge impact a sudden spike in demand could have on the whole of manufacturing and supply chain industry. The pandemic led to an increase in sales of electronic devices, which needs semi-conductors, however the same pandemic disrupted the production of the semi-conductors in countries like Taiwan and China, adding to a skewed demand-supply situation. The problem was aggravated as semi-conductor requirement has been growing over the years while the supply remained the same.
To avoid such situations, the manufacturers are working towards just-in-time manufacturing strategy which helps them work with minimum inventories. Others are moving the production closer to home while keeping the offshore facility to serve local markets. They are also diversifying their sourcing locations to have minimum impact on the production. It might not trigger reverse globalization but it will certainly be tuned towards improving product availability.
As companies and consumers adapt to the reality, the supply-chain will be more resilient in the coming year. The core of the industry - its people, processes and technology, will need capacity building and systems to safeguard against future disruptions to ensure smoother supply chain management across the world.