Wall Street Times

Managers think the supply chain will not recover until 2024

Most logistics managers from large companies and trade groups think the supply chain will return to normal in 2024 or later.

In a survey conducted by a media site, more than half of the managers, or 61% of them, say that the supply chain is not functioning normally. Meanwhile, 32% say otherwise.

When the managers were asked when they expected the condition to return to normal, around 22% were unsure, 19% said next year, and 30% thought it would be normal in 2024. Finally, the remaining 29% said it should return to normalcy in 2025, with some saying it could never revert to the norm.

This dismal outlook from trade managers is the result of the supply chain disruption that started roughly three years ago when Covid-19 began in Wuhan, China. Since then, the world has been facing tremendous pressure and difficulty in reviving the countries’ economies.

However, strict Covid policies among countries have impeded the exchange of goods and services across countries. The survey included American Apparel and Footwear Association members, the Pacific Coast Council, the Agriculture Transportation Coalition, the National Retail Foundation, and the Coalition of New England Companies for Trade.

“The administration needs to remain focused and continue to convene the right supply chain stakeholders to discuss ways to improve supply chain operations and expand data sharing to create a truly 21st century supply chain,” said Jon Gold, the NRF supply chain and customs policy vice president.

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The government must work with managers

Many managers, precisely 59%, think that the Biden administration must be aware of the supply chain challenges. However, managers said it would help the supply chain if the government and logistics managers shared their data. This would help freights to move faster.

“The carriers have arbitrarily imposed such charges on customs brokers, even though we may not have had any role in booking or managing the transportation,” added Eduardo Acosta, Pacific Coast Council of Customs Brokers and Freight Forwarders Association president.

“The survey provides data supporting the imperative for the Federal Maritime Commission to advance its proposed rule to end this unreasonable carrier practice,” Acosta added.

“Hard data is the backbone of effective supply chain management, especially amidst the uncertainty shown in this survey. Intelligence about real-time cargo flows is essential. The survey highlights the need for the industry to rally around better data-sharing solutions,” said Karen Kenney, CONECT chair.

“Now is the time to double down on bringing all stakeholders together to create and implement real solutions to structural problems so that we don’t end up skipping from crisis to crisis,” said AAFA senior vice president Nate Herman.

Problems faced by logistics managers

According to the majority of the logistics manager, they lack raw materials, which worsen their situation. Moreover, port congestion, shortage of workers, and reduction of warehouse spaces do not help their case. Other factors managers face are cancellations of sailings, excessive fees, and strict terminal rules.

“US agriculture and forest products industries are being rendered less competitive in the global marketplace, driving inflation in domestic food costs,” explained AgTC executive director Peter Friedmann.

“The survey’s inventory of impacts of ocean carrier practices accurately reflects the experiences of AgTC membership – the agriculture sector nationwide. Detention and Demurrage Billing Practices determine the cost of exporting and importing a vast amount of goods crossing our seaport docks, and thus a significant driver of inflation,” he added.

For years, warehouse spaces have been filled with inventories, brought by the slowing down of purchase among Americans. When warehouse spaces decrease, the price for renting a space increases. According to the managers, they have seen a 400% rise in warehouse prices. This leads many retailers to offer discounted prices to buyers in hopes of clearing out the warehouses they intend for other incoming products.

“Customers are shopping discounts and we are seeing that in the items we are moving. It’s the higher value products like tennis shoes over a lower cost t-shirt,” said DHL Supply Chain CEO Scott Sureddin.

“I have never seen inventory levels like this, and after the first of the year, retailers can’t continue to sit on this inventory, so the discounts they’ve been pushing will have to continue,” he added.

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Inflation in the US

Logistic costs are even higher due to inflation in the US. Higher energy and labor costs mean companies must spend more on these services. Coupled with the higher costs of warehouses and other constraints, managers need help managing the finances of supply chain companies.

Moreover, the war between Russia and Ukraine impeded several global markets and products like wheat and grain. In terms of laborers, managers are growing more concerned about the mental health of their workers in the face of worker shortage which can contribute to burnout and strain.

And now, as the holiday season kicks in, several freights are having problems getting in and out states due to the winter storm. Many airline companies and couriers have said delays would happen as streets are covered with inches of snow. In addition, several people have died as government services are stranded due to impassable roads.

“International logistics is still a business driven by people. “The survey highlights all sorts of challenges in the supply chain, but none of those will get solved without the right talent and expertise,” explained Kenney.