The Ferrari Consulting and Research Group through its affiliated Supply Chain Matters blog features a series of blogs outlining individual 2022 Predictions for Industry and Global Supply Chains.

Introduction

Since our inception in 2008, The Ferrari Consulting and Research Group has annually published a series of supply chain management focused predictions. They are produced to advise our clients, sponsors and the broader global supply chain management community as to what to anticipate in the coming year.

Our goal is to depict how likely global, regional, economic, industry and advanced technology trends will impact, and likely influence required supply chain management actions. They further provide the baseline of our added research and advisory topics during the coming year.

The context of these predictions include a broad cross-functional umbrella of what is today considered supply chain management, and includes areas of leadership and strategy, product management, strategic sourcing and procurement, supply chain planning and customer fulfillment, manufacturing, logistics, transportation and customer service management.

In two prior Supply Chain Matters postings, we shared the context of our 2022 Predictions:

Global Economic Forecasts Portend Added Uncertainties for Supply Chain Management Teams

What Should Supply Chain Management Teams Expect In 2022 And Beyond

 

In this series of Supply Chain Matters postings, we will share with our readers some excerpts of the ten specific 2022 Predictions that will be included in our Research Advisory that will be made available in early January 2022.

This Part One blog shares our first prediction.

2022 Prediction One

With Elements of Uncertainty Continuing, the Supply Chain Challenges and Disruptions That Occurred in 2021 Will Linger Well into 2022, and Some Will Extend Into 2023.

Pandemic Effects

With the sudden emergence of the new and more highly contagious Covid-19 Omicron variant at the end of 2021, and with the bulk of the global populations not fully vaccinated, there is a discernable concern that continued supply network, operational and transportation disruptions will permeate the coming year.

Much will depend on the extent of which global health agencies and various countries can scale the administration of effective vaccines among unvaccinated nations or make available new oral therapeutics. A further cited dependency stems from the notions of population fatigue after two past years of disease outbreaks.

Policies and augmented measures from governments and global health agencies concerning administration of vaccine and face mask mandates, testing regimes or restrictions in gatherings will loom important.

The positive news is that much learning has occurred since the global-wide pandemic first began in 2020, and that includes global supply chain participants.

Global Transportation and Logistics Disruption

As December 2021 comes to a close, upwards of 100 container ships remained queued across the Pacific Ocean seeking to be processed by the major U.S. West Coast ports of Los Angeles and Long Beach. This condition serves as the fitting conclusion to a year that included a nonstop continuous series of transportation and logistics focused disruptions, which have led to consequent impacts to supplier lead times, exploding transport and logistics related costs.

Events began earlier in the year, with severe winter storms impacting Western Europe and major portions of the United States including wide portions of Texas and Oklahoma. In March, the Black Swan event involving the accidental grounding of one of the globe’s largest container ships in the middle of the Suez Canal set off a consequent disruption of most all global shipping scheduling, which effects and consequences continued for the rest of the year.

Throughout the year, consumers primarily among developed nations exercised continuous demand for pandemic related product needs such as home office furnishings, personal computers, exercise equipment and needed health supplies. Global production levels soared throughout 2021, but the result was extraordinary demand meeting severely constrained supply and disrupted transportation capacity.

In the run up to the holiday fulfillment quarter, multiple container shipping lines were able to extract significant spot rate freight and volumes surcharge increases rising to as high as $29,000 per container to ship from China/East Asia to the US West Coast. The Freightos Global Container Index for this routing stood at $14,616 in late December, reflecting a 137.7 percent increase from the beginning of 2021.

Industry participants and observers are of the view that transportation and logistics disruptions and high rates will continue into 2022, and supply chain teams will again have to manage the impacts and consequences to margins.

Global Economic and Financial Sentiment

As highlighted this sentiment in our synopsis of global economic forecasts, both the International Monetary Fund (IMF) and The Organization for Economic Cooperation and Development (OECD) anticipate moderating global output for the coming year, extending into 2023.

CFO and C-Suite sentiment data indicate that many businesses will continue to pass along the majority of input price increases for direct materials costs in continuing end product price increases. At the same time, CFO’s will likely seek to reduce costs in other areas, eliminating or substituting product offerings, adding contingency clauses into supplier or customer contracts. Data would also indicate that CFO’s will remain concerned with the loss of skilled talent, and support evidence-based needs for added compensation levels. The offset will likely be added automation applied to certain manual intensive business process areas.

We therefore predict that supply chain disruptions, cost inflation and uncertainty will continue to permeate into 2022 before they get better.

 

In subsequent individual year 2022 predictions, we will address other specific areas that will require added attention or consequences.

In Part Two of this series, we will share our prediction in the areas of strategic and tactical direct materials sourcing and supply management.

Stay tuned.

 

Bob Ferrari

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