TOP FIVE (5) SUPPLY-CHAIN RISKS FOR 2022

The following post is taken from the magazine “Supply-Chain Management Review” January 17, 2022. The article in that addition was written by Gary Forger.  The headings are his, the text under each heading is mine.  I have several points I wish to make in addition to Mr. Forger’s.

The top five (5) supply-chain risks are detailed in a study by Everstream Analytics for the twelve (12) months of 2022.  The risk points are as follows:

• WORLD-WIDE WATER INSTABILITY:   According to the United Nations, one in three people live without sanitation. A lack of sanitation and sanitary waste management systems can reduce a community’s access to clean water, and lack of access to clean water can allow diseases to run rampant, sometimes creating epidemics of water-borne infectious agents.  Also, water instability can and does affect the ability of a country to foster and sustain economic growth.  Water scarcity, exacerbated by climate change, could cost some regions up to six percent (6%) of their GDP, spur migration, and spark conflict. … These regions could see their growth rates decline by as much as six percent (6%) of GDP by 2050 due to water-related impacts on agriculture, health, and incomes.
• OCEAN FREIGHT BOTTLENECKS:  US retailer representatives and logistics advisors expect supply chain congestion to continue well into 2022, as strong demand persists and ports struggle to clear backlogs of containers at the country’s main import gateways. Imports at the nation’s congested container ports are expected to remain at near-record levels for the remainder of the year as retailers rush to move merchandise from docks to shelves in time to meet the expectations of holiday shoppers, according to the latest monthly Global Port Tracker report released yesterday by the National Retail Federation (NRF) and Hackett Associates.

• CONTINUOUSLY CHANGING WORKPLACE:  As the Omicron variant of COVID-19 spreads across the world, the risk of infection will force companies to reassess how workplace safety and worker compensation to avoid the risk of long-term disruptions from industrial actions or outbreaks of disease.  “If we look at the global situation, I think it’s fair to say that we are still in very challenging times,” Rasmus Bech Hansen, CEO of Airfinity, a life sciences analytics company, said during a recent press briefing. “Cases globally are rising quite significantly. We are sadly not far from the biggest peak we had in 2021.”  This will definitely will cause companies and employees re-think working from home, if possible, and when it’s not possible to take measures, maybe extreme measures to stay safe.  These measures can cause workplace interruptions and showdowns.

• JUST-IN-TIME SHIFTS TO JUST-IN-CASE:   As the pandemic exposed flaws in “just in time” inventory systems, businesses have been exploring a shift to the “just in case” model, increasing buffer and safety stocks of critical components or best-selling products.  This coupled with considerable delays in ocean freight bottlenecks will change the supply-chain dynamic drastically.  Some companies such as Walmart and COSTCO are managing their own freight from the Pacific Rim.
• INCREASED REGULATORY SCRUTINY:  Why the federal government is getting more involved in container shipping than it has in two decades is no surprise. Public and business concerns over rising inflation are rising, as the Consumer Price Index surged six-point-eight percent (6.8%) in November, the sharpest increase since 1982. And there are few signs that US port congestion will ease anytime soon, as the number of container ships drifting and anchored off Southern California hit ninety-five (95) on Dec. 10, and another sixty-seven (67) loitering or slow steaming outside the staging ground managed by the Maritime Exchange of Southern California. US retailers say they won’t slow importing post winter holidays in the first few months of the year.

Right or wrong, the public holds the federal government responsible for port congestion and shipping disruption. According to a survey of registered voters conducted by Morning Consult and news outlet Politico, sixty-two (62) percent said President Joe Biden and Congress bear some responsibility for supply chain disruptions.

CONCLUSION:  In my opinion, we should strongly consider re-shoring as an option toward solving our supply-chain dilemma.  Let’s bring it all home and reconstitute our manufacturing base as well as getting millions of US workers back on the job.  The Fed could offer tax incentives to companies willing to re-shore their manufactured products.  I’m sure other inducements could be considered as well.