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Greater than half of logistics managers at large corporations and trade groups say they do not expect the supply chain to return to normal before or after 2024, according to a latest CNBC study.
Sixty-one percent of respondents said their current supply chain was not operating normally, compared to 32% who said it was operating normally. When asked once they see a return to normal, 22% were unsure, 19% said in 2023 and 30% in 2024.
One other 29% said 2025 or later or never.
The grim outlook comes after nearly three years of worldwide supply chain woes that began with the lockdown of Wuhan, China, where the Covid-19 outbreak broke out. Respondents to the survey said they still place orders six months upfront to ensure they arrive.
The study surveyed 341 logistics managers during the week of December 12-19 at corporations belonging to the National Retail Federation, American Apparel and Footwear Association, Council of Supply Chain Management Professionals, Pacific Coast Council, Agriculture Transportation Coalition and Coalition of Recent England Firms for Trade participated in the first supply chain study conducted by CNBC.
Data sharing
When asked in the event that they thought the Biden administration understood the challenges facing the supply chain, 59% of respondents said no.
Jon Gold, NRF’s vice chairman of supply chain and customs policy, said the administration has taken steps to address supply chain challenges.
For instance, earlier this yr, the administration launched a pilot supply chain data exchange program called Freight Logistics Optimization Works, or FLOW. The Department of Transportation told CNBC that there are currently 46 contestants on the show.
“The administration needs to stay focused and proceed to convene relevant supply chain stakeholders to discuss ways to streamline supply chain operations and expand data sharing to create a really twenty first centuryst age of the supply chain,” said Gold.
Eduardo Acosta, president of the Pacific Coast Council of Customs Brokers and Freight Forwarders Association, also noted the need for further reform.
“Carriers arbitrarily imposed such fees on customs agents, regardless that we may not have had any role in booking or managing the transportation,” he said. “The study provides data that supports the Federal Maritime Commission’s imperative to speed up the proposed rule to end this unwarranted carrier practice.”
Fifty-one percent of logistics managers surveyed said they didn’t imagine they’d arrange a national supply chain database, while 22% said they did and 27% said they were unsure.
Each logistics managers and government officials said data sharing would speed up the movement of products, helping to reduce costs and creating savings that could possibly be passed on to the consumer.
“Hard data is at the heart of effective supply chain management, especially given the uncertainties identified on this survey,” said Karen Kenney, CONECT Chair. “Real-time intelligence on cargo flows is crucial. The study highlights the industry’s need to concentrate on higher data sharing solutions.”
Nate Herman, AAFA’s senior vice chairman of policy, told CNBC that the problems that caused the supply chain crisis were removed from over.
“Now’s the time to redouble efforts to bring all stakeholders together to create and implement real solutions to structural problems in order that we do not jump from crisis to crisis,” he said.
Emptying warehouses
Amongst the biggest challenges cited by logistics managers in the survey were the lack of availability of raw materials, congested ports, lack of expert staff and shrinking warehouse space due to soaring inventories. Terminal rules for collecting and returning containers, charges for container delays (stopping and berthing) and canceled sailings were also quoted.
“The U.S. agricultural and forest products industries have gotten less competitive in the global market, causing domestic food costs to inflate,” said Peter Friedmann, executive director of the AgTC. “The survey’s inventory of the effects of ocean carrier practices accurately reflects the experiences of members of the AgTC – the agricultural sector across the country. Detention and demurrage practices determine the cost of exporting and importing the vast amount of products moving through our port docks, and subsequently a major driver of inflation.”
Bloated inventory has kept warehouses packed, with respondents saying they’ve seen a 400% increase in warehouse prices as space shrinks. This is helpful for consumers who go for heavily discounted products when retailers try to take the product out of stock.
Scott Sureddin, CEO of DHL Supply Chain, said freight volumes remained flat after Cyber Week, but at the moment are up 10% from last yr as retailers cut prices to clear inventory.
“Customers get discounts on purchases and we see that in the items we feature. These are higher value items like tennis shoes as an alternative of cheaper T-shirts,” he said. “I’ve never seen stock levels like this, and after the first this yr, retailers cannot keep sitting on that inventory, so the discounts they have been pushing for can have to proceed.”
Inflation, work pressure
According to respondents, energy prices and labor are two inflationary pressures that proceed to drive up logistics costs. Russia’s war on Ukraine followed by tariffs imposed during the Trump administration were major geopolitical events affecting the supply chain followed by Covid.
By way of the labor market, respondents said they were concerned about the mental health of their workforce, in addition to the shortage of expert staff, which added to stress. The survey results listed these as issues: worker burnout (65%), shortage of staff with the right skills (61%) and hiring to fill the skills gap (75%).
“International logistics remains to be a people-driven business,” said Kenney of CONECT. “The study highlights all types of challenges in the supply chain, but none of them can be solved without the right talent and expertise.”