Five supply chain stories you may have missed from the start of the year

Mon 9 Jan 2023
Posted by: Phillip Adnett
Trade News

Global supply chain

Since the start Covid pandemic, businesses have had to grapple with an increased number of supply chain disruptions.

While global shipping has shown signs of stabilising, further disruptions are never far away, whether due to strikes, the climate or major geopolitical events like the war in Ukraine.

The IOE&IT Daily Update here looks at five key supply chain news stories you may have missed since the start of the year to help you better anticipate and manage future disruptions.

Companies ill prepared

Three-quarters of organisations have been impacted by supply chain disruptions in the past three years, but less than 20% feel equipped to handle such events in the future. 

A report by Capgemini argues there is a need for businesses to develop connected networks with integrated data-driven planning to provide real-time insights to plan for future scenarios.

“The last few years have highlighted the need for organisations to build agile and resilient supply chains, not only to cope with disruptions but also to help them stay ahead of the curve, especially from a sustainability perspective,” said Mayank Sharma, global supply chain lead at Capgemini.

Organisations plan to increase investment in supply chain transformation by 17% over the next three years, according to the research.

Capgemini suggests that 25% of global trade is set to relocate in the next three years with the geographical distribution of supplier bases set to transition from majority global to local by 2026.

China Covid threat

Although China has abandoned its zero-Covid approach, managing outbreaks could still have an effect on global supply chains, reports Nikkei Asia.

Tech manufacturers initially welcomed the turnaround but now face the challenge of rising infections and looser controls.

“It’s very chaotic,” an executive at a company that supplies Samsung and Apple told Nikkei.

Some worry that the abrupt exit from zero-Covid will have knock-on effects for China’s economy.

“The rapid surge of infections in big cities might be only the beginning of a massive wave of Covid infections,” Ting Lu, Nomura’s chief China economist, warned in a recent note.

Car industry woes

Supply chain disruption has driven new car sales to their lowest level in 30 years, reports the Guardian.

The disruption to global supply chains and ongoing shortages of semiconductor chips has continued to affect carmakers, resulting in 700,000 fewer new cars sold last year than in 2019.

More than 1.6m new cars were sold in the UK last year, a 2% fall from 2021, and the lowest level since 1992, according to Society of Motor Manufacturers and Traders (SMMT) data, as reported by the FT.

Sales of electric vehicles reached their largest-ever monthly market share in December, accounting for almost a third of all new cars sold.

The SMMT is predicting 2023 to be a “year of recovery” with 15% higher sales this year, fuelled by the ending of China’s zero-Covid regime.

US firms still struggling

Ongoing supply chain issues continue to trouble US manufacturers, with 98% of respondents to an Association of Equipment Manufacturers survey saying they are still affected

A further 58% stated they are experiencing worsening conditions, with the Hill saying that the aftermath of the pandemic has disrupted the global economy in ways not seen since WWII.

According to New Civil Engineer although shortages of raw materials will ease this year, prices – which have been rising for almost two years – will remain high.

Supply chain bottlenecks mean manufacturers are facing an average production loss of 12% in the year to date, and are forecasting continued losses exceeding 8% in 2023.

Shipping rates stabilising

Following stratospheric shipping prices over the past two years, rates are continuing to stabilise, with Drewry’s most recent composite index down 77% on last year.

The latest Drewry WCI composite index of $2,1235 per 40-foot container is now 79% below the peak of $10,377 reached in September 2021.

This is 21% lower than the 10-year average of $2,694, indicating a return to more normal prices, but it is 50% higher than average 2019 rates of $1,420.

A slump in demand for Asia to North Europe sailing is leading to some carriers operating “ghost ship” loops, reports the Loadstar.

Maersk’s Asia-Pacific market update, published at the end of December, was equally downbeat on the outlook for Asian exports, adding that cargo demand remained “weak” and this was “expected to continue into 2023”.