Are Global Supply Chain Issues Easing?

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The global chip shortage and supply chain woes linked to Covid-19 restrictions in China are posing problems for Nintendo
The global chip shortage and supply chain woes linked to Covid-19 restrictions in China are posing problems for Nintendo

Global supply chain issues like port congestions and container shortages have been critical factors behind the recent inflation surge. They have pushed transportation costs higher, resulting in higher prices for the end buyer, the consumer.

In addition, global supply chain issues have caused product delivery delays, which added to inflationary pressures.

Initially, economic observers, including the Federal Reserve, thought that global supply-chain issues were temporary due to the inability of the supply side of the global economy to catch up with the increased demand unleashed by the end of the pandemic lockdowns. Thus, the Fed and other central bankers around the world hesitated to take action against inflation.

But the supply-chain issues weren't temporary. Global supply chain problems persisted well beyond the end of the pandemic lockdowns.

"More than two years ago, we witnessed something unprecedented when the supply chain worldwide came to a complete standstill, the effects of which have been long-standing," Sateesh Seethamariah, the CEO of EdgeVerve Systems, told International Business Times in an email. "While problems with the supply chain started with COVID-19, this was compounded with increasing consumer demand for certain products and cascaded across other categories of products as the pandemic and buying behavior evolved over the last couple of years."

 What about recently? Are global supply chain issues easing? Experts are divided.

Seethamariah contends that they are easing, pointing to several supply chain indexes that have been declining recently.

"Oxford's U.S. supply strain index and Global Supply Chain Pressure Index GSCPI have fallen for three straight months as an indicator of turnaround,” he said. “Even the Baltic exchange dry index has shown pressure easing the cost of shipping goods worldwide. Today, supply chain issues are easing post-pandemic, and the worst is behind us. While still early days, it looks like we may have made the turn for the better as we have noticed that the logjams at ports are easing, and retailers have started reporting higher inventory. Even consumer confidence and spending on the demand side are improving. "

Shanton Wilcox, U.S. manufacturing lead at PA Consulting, thinks that supply chain issues are not easing. Instead, they have been overshadowed by the media headlines by inflation and gas prices. He cited U.K. car sales falling 9% in July, while Toyota and Lucid lowered production targets due to supply chain issues like plant shutdowns in China and the ongoing chip shortage.

“The chip shortage also caused Nintendo to miss its forecast for the Switch console," Wilcox said. "There are warnings from utilities in Florida that recovering from a hurricane this year may take months to even a year as manufacturers of transformers and other components have historic backlogs and are even declining new orders."

Faidra Papailia, a retail supply chain coordinator at CS&L at Mondelez International, expects 2022 to be a challenging year for the supply chain on a global level.

"Regarding the food industry, the COVID pandemic, as well as the conflict in Ukraine, have had a negative impact on sourcing, production capacity & logistics," she said. "Even though the food giants were quite agile in adapting their supply chain to the new standards, they still face great challenges, and I would say a full recovery should not be expected before 2022."

Bill Catania, the CEO of OneRail, took a similar position to Papailia.

"There is going to be some type of a peak and some type of a supply and demand gap this year," he said. "Even with e-commerce slowing down, it would be foolish to prepare for a slowdown. You'll still see that spike that we've come to know and love in that November to January timeframe. I don't think we're immune to that uptick because there's been a bit of a slowdown in what was a 50% growth period."

What about price pressures on critical products like food supplies? Papailia thinks the market is too volatile to predict the near future.

"There has been a significant increase in prices of raw materials and transportation the past months, posing great challenges for the food industry," she said. "But I would say that the market is still quite volatile to make any concrete conclusions on the price evolution for the next quarter."

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