Reflections 2021 – A year that was for the supply chain industry
Yet another year of great disruptions comes to an end. At the start of 2021, the supply chain industry faced with unprecedented crises that revolved around excessive demand, poor supply and unavailability of shipping containers. It impacted trade world over and now even as we near the end of 2021, it is obvious that the crises is far from over.
Looking back, there are a few lessons to be learnt and new insights that can help the supply chain industry equip themselves better for the coming years. Our current post attempts to understand these learnings by looking back and reflecting at important things that shaped the year 2021 for logistics industry.
Supply Chain bottlenecks to continue
Even as we get ready to step into a brand new year, the joy is overshadowed by new variants like Omicron. Looking back, it is evident that the supply and production will continue to be disrupted as new variants emerge and states are forced to implement restrictive measures. The bottle necks are expected to ease only by early 2023. Some areas like Europe and US might take longer as the effects of pandemic are severe and there is a lack of investment in shipping infrastructure.
Is the worst over for shippers?
Increased shipping costs are expected to continue well into the year 2022. While the rates seem to be stabilizing a bit, they are still extremely high as compared to Pre-COVID levels. Apart from this, rates of certain routes like those originating in Asia seem to be particularly high. As countries look to diversify their sourcing and invest in internal capacity building, the impact on global supply chain will be evident in the long run. In the short run, the businesses will be forced to pay a premium or look for other competitive modes of transport.
The year of new geopolitical blocs
The year 2021 saw some new geopolitical trade and cooperation blocs that seem to be focused on reducing the dependency on a particular country. These strategic partnerships offer alternatives, simplify trade routes and help develop trade co-operations. Similarly, such groupings could also result in trade wars with other countries that can have a direct impact on the supply-chain. We cannot afford intense trade wars at a time when economies world-over are still reeling under the pandemic shock and might take some time before reaching the pre-pandemic levels.
Emerging destinations for manufacturing and supply chain
In the aftermath of the pandemic, most countries realized the need to diversify their procurement and manufacturing activities. Excessive reliance on a country for manufacturing and delivery is detrimental for any business. This thought has opened doors of opportunities for middle income countries like Vietnam and India to be an alternate manufacturing hub. The positive economic outlook has boosted confidence among investors and companies are actively looking to set up manufacturing and trade hubs in other Asian countries. Strong manufacturing sectors across various countries will result in a stronger supply chain network.
Digital Transformation in supply chain management
Digital transformation has been underway in the supply chain industry, but its penetration was accelerated with the pandemic and the subsequent disruptions. Digital and technology enabled tools are helping businesses manage their inventory and warehouse, get complete visibility of the cargo status to plan their strategies effectively.
TGF too implemented an in-house technology tool that can enable all the data and service requirements through a single control tower led platform in our customer portal.
Stringent government regulations to monitor price rise
As the shipping costs continued to spiral out of control in 2021, regulators from various countries have stepped forward to investigate the price rise. The Australian Competition and Consumer Commission has launched an investigation to check whether there was a breach of competition laws. Similarly, US Federal Maritime Commission has launched an investigation into the timing and legal sufficiency of ocean carrier practices with respect to certain surcharges. Competition issues related to the shipping industry were discussed in the global regulatory summit that was attended by US, Europe and China.
Redesign and Reinvent to stay competitive
2021 brought with it a big learning curve for the freight forwarders. They had to rethink the offerings and reoptimize the service lines to provide the best alternative to their customers. Freight forwarders who embraced digital transformations, stayed ahead in the market. Compliance and regulations were another area that impacted the freight forwarders. These seem to be evolving and driven by market forces as well as geo political situations. Freight forwarders who can offer end to end visibility, take advantage of evolving regulations and provide omni-channel shipping will be the biggest gainers in the coming year.
Climate change and its impact on supply chain
Climate change and its effects are here to see for everyone. Apart from the pandemic, the supply chain networks had to endure supply chain disruptions caused by natural calamities world over. Hurricanes in USA, Flooding and storms in India, Cold wave in Texas, forest fires in California, flooding in China and similar. All these calamities affected the supply chain networks. As we step into 2022, it is important for businesses to undertake green measures and mitigate the climate change risks. Extreme weather conditions will not only impact the trade routes but might also change the way countries do business over the years.
The past year has brought with it, resilience and new opportunities. As we move forward it is important to remember that things will not change drastically in the coming year. High rates, port congestions and supply disruptions will continue, however businesses will continue to learn and evolve with the situation. Diversifying might help businesses and logistics companies to move forward. Forward thinking businesses will implement green measures, reoptimize the service lines, provide omni-channel shipping and continue to digitalize their operations for maximizing visibility and productivity.