After several false starts, supply chain disruptions are finally showing clear signs of unwinding. Throughout supply chains, signs point to a significant slowdown aided greatly by a drop in shipping volumes.
Shipping container prices on key Pacific routes have plunged from record-breaking pandemic highs. Air cargo prices—which took off as shippers tried to avoid crowded seaports—are leveling off. And once-hot warehousing real estate is in retreat, with firms holding back on expansions and working hard on decreasing swelling inventories.
While consumers’ return to more normal spending patterns has played a significant role in weakening demand for goods, the economic headwinds accompanying this shift are fueling fears that the slowdown could be a sign of harder times ahead. For shippers, the challenge now will be winding down from the pandemic’s frenzy while contending with persistent supply chain disruptions and a new wave of uncertainty.
Port congestions ease as other supply chain disruptions loom
In 2021, peak season delays were fueled mainly by lockdowns, excess demand, and constrained capacity. This year, with decreasing demand and lockdowns a thing of the past, ongoing labor shortages and worker unrest have taken center stage as the main culprit for delays and supply chain disruptions.
Since the pandemic’s start, ports, airports, and ground transport across the US and Europe have been experiencing back-to-back strikes, stalled union negotiations, and acute labor shortages. Now, inflation and rising living costs are compounding long-simmering discontent from workers who soldiered on throughout the pandemic with little to show for their efforts.
In the US, shippers are avoiding West Coast ports as dock worker negotiations drag on and worries of delays for inbound shipments during the upcoming holiday season grow. Europe has been particularly hard-hit, with walkouts at Felixstowe and Liverpool worsening congestion in Rotterdam and Hamburg as vessels divert to continental ports.
Workers in land transport are unhappy too. Earlier this summer, a truck driver strike in Oakland brought that port to a standstill. And another truckers’ strike in South Korea hit already strained automotive and computer chip supply chains. As peak season gets underway, the threat of a railroad worker strike in the United States has government officials and businesses wringing their hands at the possibility of major disruptions to American supply chains during peak season.
Since workers’ strikes tend to be limited to specific countries or regions, shippers can rest assured the chance of considerable disruption on the scale they experienced with lockdowns, China’s zero-Covid policy, or the global container shortage is low. Reduced cargo volumes help too. Fewer ships and containers at seaports mean smaller and less-disruptive jams.
A new definition of recovery
Rather than a global return to business as usual, the degree of recovery in supply chain conditions will vary across regions and sectors. For example, transpacific lanes—where cargo volumes have dropped sharply—are experiencing less congestion than their European counterparts, where strikes have disrupted port operations. Ongoing raw material shortages are also a concern—with industries like food, Pharma, automotive, and electronics struggling to meet demand while keeping costs down.
In addition to labor and raw materials shortages, inflation and economic uncertainty seem to continue squeezing businesses and consumers and extending the road to recovery. While cooling demand is helping alleviate some stress off supply chains, a deeper slump could push many firms struggling to recover from the pandemic further into the negative.
Although there are plenty of challenges, shippers are better prepared than ever to navigate them. Throughout the pandemic, they’ve learned the importance of effective forecasting, agility, and end-to-end visibility. Integrating those hard-earned lessons into contingency plans and bolstering toolkits with the right tech will be vital for adapting and thriving in changing market conditions.
CTSI-Global’s suite of software tools helps shippers build visibility and agility into their operations—from event management and rerouting shipments to finding alternative carriers. Contact us to learn how we can help you optimize your firm’s transport and logistics capabilities.