Supply chain disruptions will continue into 2022

Disruptions in the supply chain are not going away. Those disruptions will continue and companies are preparing for historic supply chain snags into 2022.

The boom in demand has overwhelmed the supply chain since the pandemic, began in 2020. Transportation has struggled to keep up as rising demand collided with COVID-19 shutdowns, labor shortages and historic weather occurrences, causing a lack of shipping containers and supplies, alongside major price hikes. Scott Price, President of UPS, recently said, “The logistics industry does not see 2022 as having any less disruption in supply chains than in 2021.”

Price also commented that low vaccination rates in key developing countries will likely lead to additional shortages of raw materials and components similar to those that continue to impact automakers, apparel manufacturers and homebuilders.

Transportation cost and material cost increases will be passed on to the consumer.

Some examples include: Kroger, the nation’s largest supermarket chain plans to hike prices because of inflation.

Food prices in the U.S. have been on the rise for six straight months. In June, U.S. consumer prices hit their largest annual increase since 2008. The oil and food category exhibited the largest price hikes.

Toyota plans to further slash its output by over 400,000 units over the next two months because of the computer-chip shortage.

Sherwin Williams, the large paint company, has been plagued by shortages since the Texas freeze, and the more recent effects of Hurricane Ida on petrochemical production.

Lululemon, the large athletic apparel company struggles with shortages and higher transportation costs because much of its supplies (like many U.S. companies) are made in countries such as Vietnam that have suffered from COVID-19 shutdowns. The company has seen a surge in sales during the pandemic, as working from home pushed a boom in athleisure wear.

Homebuilder PulteGroup has suffered shortages of lumber and glass and has warned of slower home completions, saying “the supply chain issues that have plagued the industry throughout the pandemic have increased during the second half of the year.”

In 2021, UPS hiked its prices by 4% to 5.5%, but anticipates prices to increase by a lower average of 2.8% in 2022. UPS has spent more for disinfectant, installing plastic dividers in work sites and covering hotel costs for employees in markets where workers were unable to commute to their homes due to strict government man dates.

One of the biggest disruptors during the pandemic has been and continues to be the loss of shipping capacity on commercial jets, which typically deliver some cargo on international flights. There has been a large number of aircraft sitting on the ground in deserts and that has pushed more goods to ports or to thealternate air services.

“Vaccine inequity” has been a major contributor to the economic fallout between developed and developing countries. This becomes apparent when one looks at where raw materials originate and realize that they come from locations that do not have the vaccine.

There is some hope that a softening of price increases and more aspects of the supply chain will normalize in 2022, as long as the COVID-19 situation does not dramatically worsen.

Paul Polman, Dutch businessman, former CFO and VP for the Americas, Unilever and author has some great advice on how to proceed in 2022 and beyond:

“Looking at the world through a sustainability lens not only helps us ‘future proof’ our supply chain, it also fuels innovation and drives brand growth.”