According to experts, supply chain disruptions and delays could last through 2022 and well into 2023. But there is still a light at the end of the tunnel, so long as companies and officials work together towards viable solutions.
At Sourcing Journal’s Inflection Point Summit, top supply chain and industry exerts explained how the problem came to be. They also gave advice about the best way to emerge from the crisis. Here were the top three takeaways from their chat, entitled “Foolproofing Shipments: Breaking Bottlenecks and Navigating Customs.”
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The supply chain was already in trouble before the pandemic
In explaining the origins of the current supply chain issues, Eugene Laney, president and CEO of the American Association of Exporters and Importers (AAEI), pointed out that there were already existing problems when things took an unexpected turn amid the pandemic.
For example, the U.S. was dealing with a tense trade relationship with China and ongoing infrastructure issues. Once demand for certain products started to increase in the pandemic, the stage was set for a perfect storm.
“For a lot of companies, they were already sitting in a position where they were very concerned,” Laney said.
With the pandemic came a wave materials shortages, factory closures abroad in China, Malaysia, and Vietnam, labor shortages, and port congestion. These problems combined with existing issues create the situation we see today: a world in which retailers and brands are in danger of missing inventory targets for the holiday season. On top of these issues, high freight and container costs are sending footwear prices to unprecedented highs.
These problems will persist for months to come
U.S. companies and lawmakers have already worked on ways to alleviate delays and slowdowns. Walmart and Target committed to expanding nighttime hours to help process the influx of containers at the Ports of Los Angeles and Long Beach. Both of these ports are expanding to 24/7 operation with new shifts and weekend hours as well. But with the holidays around the corner, experts predict that the issues will likely get worse before they get better.
“I don’t think things will get better soon or end soon,” said David Spooner, a partner at Barnes & Thornburg LLP and the co-chair of the International Trade Practice Group. “With the supply chains as fragile as they are, I think that’s bound to make things even worse in the winter time.”
Spooner said winter snow storms and the increase of labor strikes across retail will intensify existing woes.
Shifting shipments to the East Coast to avoid backups, creating longer hours at the ports, and introducing new legislation to protect against “unreasonable” export refusals from carriers are all important measures that experts cited as being helpful for short-term alleviation. However, fixing the supply chain for good is more complicated.
There is no simple permanent solution
According to Spooner, there is no simple fix for these issues.
“The root of so many of the things that are happening in the supply chain are overseas beyond our governments controls,” he said, referring to power outages and port and factory closures in China. While U.S. legislation, such as an infrastructure bill, could help alleviate the burden, the government cannot be expected to fully solve the issues.
In looking at solutions, experts suggested improving communication and diversification along the chain.
“I think you have to diversify your supply chain,” explained Laney. “You have to be more transparent within your own supply chain of knowing who you are doing business with and what you’re bringing across the borders.”
Peter Hsieh, the VP of Sales & Marketing for OEC Group, one of the largest Trans-Pacific cargo carriers, said that his company is operating as many charters as possible to meet deadlines. He advised brands and retailers to be “proactive” about sharing their orders and needs with supply chain providers so they can prepare accordingly.
Despite the current problems, Hsieh is optimistic about the potential for recovery.
“There is a light at the end of the tunnel,” he said.
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