Supply chain executives foresee trouble on the horizon.
With fuel cost pressures and other threats looming, a return to a “normal” supply chain is not expected in the near future.
More than half of all respondents don’t expect a return to a more normal supply chain until the first half of 2024 or beyond, while 22% say they expect disruptions to continue until the second half of 2023, according to a survey of more than 100 U.S. supply chain executives from Carl Marks advisors.
Respondents still see a number of threats to the return of a more reliable supply chain. They rated the greatest threats as a trade war with China (43%), impacts from the war in Ukraine (41%), resurgence of COVID-19 (39%), labor disruptions (38%), extreme weather events (27%) and cyberattacks (25%).
“With no apparent end to the Ukraine conflict in sight, we would expect fuel costs to continue to put pressure on supply chains for the remainder of the year, and possibly beyond,” said Peter Keogh, managing director, Carl Marks Advisors.“Moreover, with the U.S. economy potentially entering recession, we could see an extended period of uncertainty. In this environment, it will be incumbent on organizations to review their sales forecasting, continue to monitor their on-hand inventory levels, and revisit their procurement strategies.”
According to the survey, 75% of supply chain executives said revenues at their company had been either negatively or very negatively impacted over the past year by supply chain issues. Ocean shipping was by far the leading broken transportation and logistics link, at 68%.
The impact of the disruptions has been severe: Eighty-percent of respondents said their supply chain costs have risen by between 20 to 60% between December 2020 and December of 2022.
As a result of the challenges and lessons learned during the COVID-19 pandemic, more than half (53%) of respondents have diversified suppliers. Half are keeping more inventory, while 39% are investing in new technology and 38% are both using more onshore or near-shore resources and using alternate parts.
Other supply chain responses to COVID-19 have been upgrading the team (33%) and adding more points of distribution (28%).
Other findings from the survey are below.
• More than two-thirds of supply chain executives said they are “very concerned” that the U.S. economy could tilt into a recession over the next 12 months as a result of rising interest rates, high inflation and geopolitical uncertainty, and a resultant pull-back in consumer confidence.
• When asked what “magic levers” could potentially bring supply chain costs under control in 2022 and help mitigate uncertainty, the leading responses were ending the war in Ukraine (32%) and lowering fuel costs by 20% (31%), outlawing supply chain profiteering/corruption (21%), raising interest rates quickly and significantly to halt inflation (10%) and freezing wages (2%).
“This research underscores just how profoundly the pandemic impacted corporate supply chains, but also how economic conditions, rising inflation and global tensions are preventing a return to normal,” said Keogh. “In this environment, organizations will need to continue to be nimble, and be especially attentive to inventory levels. In the retail sector, for example, many companies overcompensated for supply chain disruptions by aggressively stocking products, and are now facing an inventory glut.”