July 1, 2022 | Insights
2022 Supply Chain Outlook for Distribution Logistics
July 1, 2022 | Insights
This time last year, manufacturers and suppliers around the world were faced with the unimaginable. COVID-19 was continuing to spread, and it also took grip on our supply chain, exposing some of the weakest industry links. Lumber and labor shortages were common themes in 2021, along with growing lead times across every industry that relies on shipping. The question is, what’s changed since?
Many equipment, labor, and material shortages persist, while newly heightened global conflicts have entered the game. Energy resources have become limited and crude oil and transportation more expensive. Now almost halfway through 2022, we’re buckling in for another year (at least) of massive supply chain swings and strategic pivots by global companies to make their operation less vulnerable to the fluctuating global landscape.
Chassis Shortages are Keeping Ports Congested
Pandemic port congestion has redefined shipping delays. Before COVID-19, cargo that sat in the harbor two or three days was considered a worst-case scenario. Now, port wait times in North America are averaging two to three weeks—and that’s an improvement from the three-month wait times we saw last year.
Two major factors play a role in this relentless port congestion: marine chassis and longshoreman shortages. Both continue to prevent ports from keeping their backlogs at bay or maintaining any sort of predictable flow of goods to distribution centers.
Truck Drivers are Losing Faith
Truck drivers—the backbone of surging ecommerce and retail in North America—may be feeling the worst sting from supply chain disruptions. The once-stable flow of North American imports and exports created a steady stream of work for truck drivers. As a result, many drivers were loyal to their routes. Today, that’s no longer possible.
Between goods shortages and global trade conflicts, the US and Canada are switching to other sources for imported products and it’s affecting truck routes around the continent. The United States’ recent block on avocado shipments from Mexico is an example of this. Most avocados are imported from Mexico through ports in Texas and when those shipments freeze, so do the truck routes that distribute those avocados to the north. Unreliable routes like this have caused truck driver retention rates to plummet.
The Great Resignation is Still Going Strong
Alongside truck drivers, workers of all trades are reevaluating their priorities. Last year, workers began quitting their jobs by the millions in search of better opportunities, a trend that is still gaining momentum. In the latest Job Openings and Labor Turnover Survey, the US Bureau of Labor Statistics reports that 4.5 million workers willingly walked away from their jobs in March of 2022–the biggest wave so far in the Great Resignation.
Global Conflict is Driving Unforeseen Costs
Global response to the ongoing Ukraine-Russia struggle is creating scarcity among certain commodities and driving up the cost of crude oil and transportation. At the same time, Asia’s imposed tariffs and duties on shipping containers that began last year, and government trade regulations (as seen with the United States’ temporary freeze on avocados imports), are all contributing to the inflation we’re experiencing today. And these unforeseen costs are hitting transportation and manufacturing operations hard.
Where the Future of Our Supply Chain Holds
Forecasts from late 2021 predicted that our ports would begin to recover in 2022, but that estimate heavily relies on an increase in marine chassis production, and a more robust workforce across the board. There’s no doubt that additional port equipment will help ease shipping pains, it’s just a matter of how soon ports can start getting the new equipment. Most chassis manufacturers are located in China, and between the recent labor shortages and COVID-19 shutdowns in Shanghai and other cities, the promise of new marine chassis shipments to North America have been pushed to 2023.
With no end in sight for port congestion, workforce challenges, or global trade challenges, other industry sectors are taking action. For many companies, a more resilient supply chain starts with “reshoring” operations to become less reliant on long-distance manufacturers. In distributing and warehousing, it starts with a new approach to operational logistics.
Preparing the Distribution Sector for Tomorrow
According to Supply Chain Canada, more companies than ever are seeking logistics partners to help them balance global fluctuations and position for recovery. Strategic partners, like NSSL, use dedicated teams of drivers and data-driven intelligence to help identify opportunities to make yard and warehouse operations more efficient, adaptable, and scalable. Finding ways to improve operations now is key for offsetting the impact of fluctuating external costs and becoming a stronger player in the supply chain of tomorrow.
If you’re looking for a logistics partner to help you streamline operations and prepare for the future of smart warehousing, we’d like to help. Call us today to get connected with an NSSL rep.