When will supply chains return to normal?
While congestion has lessened at West Coast ports, global supply chain disruption may linger for years due to economic conditions, rising inflation and global tensions, according to a survey of U.S. supply chain executives from Carl Marks Advisors.
The survey taken over May and June found that more than half of executives do not expect a return to a “normal” supply chain until the first half of 2024 or beyond, while 22 percent expect disruptions to continue until the second half of 2023.
When asked what “magic levers” could bring supply chain costs under control in 2022 and help mitigate uncertainty, the leading responses were: an end to the war in Ukraine, cited by 32 percent; lowering fuel costs by 20 percent, 31 percent; outlawing supply chain profiteering/corruption, 21 percent; and raising interest rates quickly and significantly to halt inflation, 10 percent.
“With no apparent end to the Ukraine conflict in sight, we would expect fuel costs to continue to put pressure on supply chains for the remainder of the year and possibly beyond,” said Peter Keogh, managing director, Carl Marks Advisors. “Moreover, with the U.S. economy potentially entering a recession, we could see an extended period of uncertainty.”
More encouragingly, Citi economists in a report earlier this month said logistics pressures from excessive consumer demand for goods — a central driver of inflation and the supply imbalance — are lessening, although that signals “recession risks” and may drive an inventory pileup.
Citi cautioned against declaring an “all clear” on the supply front, citing labor strikes, COVID-related factory disruptions, the Ukraine war and year-end holiday shipping pressures as potential risks.
More bleakly, some believe massive investments in automation, nearshoring/onshoring, ships, warehouses and truck drivers will be necessary to manage an uncertain trade environment. Beyond heightened geopolitical risks, dealing with climate change, including an increased number of natural disasters, pose newer risks.
Craig Fuller, CEO at FreightWaves, wrote in a column in May, “Historical models no longer work — as the world becomes far less predictable, peaceful and safe — and supply chains are far more exposed to supply and demand shocks.”
- Supply Chains Unlikely to Stabilize Until First Half of 2024 or Beyond, According to New Survey by Carl Marks Advisors and SupplyChainBrain (press release) – Carl Marks Advisors
- Supply Chains Unlikely to Stabilize Until First Half of 2024 or Beyond (executive summary) – Carl Marks Advisors
- Managing Supply Chain Disruptions: U.S., U.K. Manufacturers Accelerate Procurement – Ivalua
- Supply Chains Inching Back to Normal, Brace for Headwinds of Softer Demand – Bloomberg
- West Coast ports reduce idling vessels as container supply increases – CNBC
- Q3 2022 BAROMETER: Supply Chains Might Get Worse Before they Get Better – QIMA
- PwC Digital Trends in Supply Chain Survey 2022 – PWC
- Overcoming the obstacles at U.S. ports – Supply Chain Management Review
- Supply chains are never returning to ‘normal’ – Freight Waves
- A Normal Supply Chain? It’s ‘Unlikely’ in 2022 – The New York Times
- Seven Things You Should Know to Understand the Supply Chain – The Wall Street Journal
DISCUSSION QUESTIONS: When do you see global supply chains becoming at least more predictable? What are the biggest unknowns?