To expedite and reduce expenses concerning the delivery of products, a major restructuring is taking place in the United States supply chain. From apparel to automobile parts, almost all merchandise made overseas arrives by cargo vessels docking at US ports.
Last year's holiday season provided a cautionary tale for retailers when goods became stuck in the Pacific Ocean off California, resulting in 109 container ships still awaiting to be offloaded at the Ports of Los Angeles and Long Beach. After being left with empty shelves, this nightmare scene forced retailers to reroute their supply chains elsewhere. Consequently, prices went up due to an imbalance between demand and supply as Americans encountered difficulties obtaining goods.
The port congestion crisis has had a noticeable impact on the US supply chain but its long-term effects are yet to be determined. As reported by the IMF's forecast, manufactured goods demand is anticipated to grow by 2.6% between now and 2024 - however, manufacturers have been unable to keep up with these demands due to shortages in global supplies. Some of the short-term implications include:
According to a recent survey, senior executives believe that the tremendous supply chain troubles and interruptions American companies have dealt with in recent years are far from over.
A staggering 52% of those surveyed believe that their supply chain needs further upgrading, and 49% anticipate these existing issues to persist until the end of 2022. Moreover, a third anticipates them to last up to summer 2023. Here’s why:
Business directors pinpoint international political disturbance (58%), shortage of raw materials (44%), and rising fuel costs (40%) as the primary sources of their current supply chain difficulties. Interestingly, only 31% attributed it to inflation.
The pandemic shook up consumer buying habits and businesses were not ready for the resulting financial pressure. Almost half of the business leaders reported supply chain problems leading to a major financial blow from the start of the pandemic, including:
With the additional expenses of supply chain issues, 61% of business leaders report that they have been forced to resort to wage or recruitment freezes, and 50% state they've had no choice but to reduce staff. As an alternative measure, only 41% opted for a price increase in their products or services.
All organizations acknowledged that their supply chains require improvement, and they are taking drastic steps to make sure they will be ready for any potential disturbances while securing their supply chain. Business leaders plan to:
An overwhelming majority of businesses (64%) are transitioning from the "just-in-time" supply chain to the more reliable "just-in-case" model, which involves storing increased amounts of inventory. Even with those already making this shift, 63% believe that it would be beneficial for the entire United States to adopt this strategy as a precautionary measure against potential future crises.
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