By Amel Gardner, vice president, Infor Middle East & Africa
For supply chain professionals, 2021 has been a whirlwind year. The supply chain received a lot of media attention for a variety of reasons, including a ship blocking the Suez Canal and a chip shortage for automakers. People around the world who had no idea what a supply chain was at the start of the year now have a lot better knowledge of how the things they buy are transported from one location to another. The reality is that many of the transportation difficulties manufacturers will face in 2021 will not disappear. In 2022, expect a lot of supply chain news, including these key trends.
1. Supply shortages will continue to keep ocean container rates high
As long as multiple global economies remain prosperous, demand for products and services will keep transportation rates, particularly by sea, at record highs. With inflation on the rise in several regions of the world, rising product costs may cause a consumer slowdown, giving manufacturers and suppliers some breathing room to resupply their inventory. However, until bottlenecks are removed, the backlog of existing demand will keep ocean transit rates higher. Transportation rates should begin to fall in 2023 as supply and demand begin to level out in the second half of 2022.
2. Sustainability initiatives will not be equal across the board
Even if heads of state reach an agreement on sustainability rules, individual enterprises will be responsible for enforcing these standards. While many corporations have stated and even implemented intentions to decrease or eliminate carbon emissions, many have yet to adopt any approach that will have both immediate and long-term consequences. There will be little change unless there is a single, standardised agreement that holds both countries and companies accountable. Consumers and investors are the most likely to drive corporations to make the necessary modifications until such a standardised exists, as younger and more environmentally conscious generations continue to grow into the greatest worldwide consumer base.
3. Organizations will bring their supply chains closer to destination
With supply constraints ranging from groceries to semiconductors, many companies have been compelled to look into ways to get critical components closer to the final manufacturing process in order to avoid repeating history. Supply chains will be better suited to handle major demand spikes as they arise, as many global firms strive to localise larger portions of their supplier base.
4. Safety stock levels will rise to avoid backlogs and shutdowns
With the global vaccination effort moving at a slower rate than expected, new COVID-19 virus variations will continue to cause caution and hesitancy about travelling and completely reopening enterprises. As a result, firms will abandon just-in-time (JIT) inventory policies in favour of stockpiling goods to avoid production interruptions. This also enables companies to leverage supply chain finance technologies to extend payment terms to suppliers by collaborating with lenders on creative financing alternatives. Organizations can develop inventory systems that are less prone to interruption while allowing their supply partners to keep healthy capital levels.
5. Companies will continue to invest in new technologies to streamline processes
As a result of talent shortages, businesses will have to accomplish more with less the effects on global supply chains are only becoming worse. Companies will need to use existing and developing technologies that provide clearer data, better collaboration, and the automation of routine operations so that team members can focus on improving supply chain processes. This would entail hastening existing digital transformations and migrating entire systems to the cloud for greater, yet safe, access to crucial data needed to make rapid and effective decisions.
The pandemic has accelerated many firms’ digital transformations far faster than they had planned, and the timescale will continue to shorten as businesses understand how vital cloud technology has become for survival.