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Hopes for Return to Normal Supply Chain Status Quickly Fading

As 2021 wound down and Supply Chain Professionals started looking towards 2022 there were widespread hopes that there would be a return to normal sooner rather than later. Those hopes are quickly fading. The Biden Administration did a short tour and issued a series of steps that were band-aids at best, counter productive at worst. 24/7 operations, lowering the age requirements of OTR drivers and several other topical policy changes made good headlines but did nothing to address the underlying issues that continue to persist.

Consider the following:

  • Sea shipping spot rates have crept up 4% on the Asia to U.S. West Coast route, ahead of the Lunar New Year holiday. However, air cargo rates spiked more.

  • China’s key priority right now is to limit the spread of Covid cases ahead of next month’s Winter Olympics and the upcoming Lunar New Year.

  • The Freightos Air Index showed the China to North Europe rate was at $9.59 per kg in mid January— up over 50% from below $6 per kg at the start of January.

  • KB Homes has cut the number of SKU’s it will build due to shorage of Gargage doors

  • Semiconductor producers don't expect shortages to improve in the near term as soaring demand and a backlog of orders constrains supply.

The economy has shown many times its incredible resilience and large firms are very adaptable and will get it right. The take-away is that this problem will be solved, just not overnight.

“’s CFO-COO David Meniane is one of an increasing number of financial executives bulking up inventory and pushing back on the long-time trend toward just-in-time lean inventory management. The e-commerce company’s inventory, which focuses on gaskets and brakes and other parts for car owners, has risen to $131.7 million as of the third quarter, nearly 3x the size it was before the pandemic in December 2019, according to SEC filings.”

Intel announced Friday it will invest at least $20 billion in two chip factories in Ohio, with production set to come online in 2025 according to a release.

The solutions and adjustments take time. Building new plants, increasing inventory and financing all of these activities will be done but their effects are gradual and long-term. Analysts believe we will continue to see lower supply and higher costs throughout the entire year. Bringing battery production, semiconductor production and drug production state-side is good for the economy as a whole and even better from a strategic supply perspective. The lessons from the pandemic are still being learned and acted upon and they look like they will put the US economy in a stronger position to deal with future disruptions.

On-shoring, hybrid domestic/international manufacturing, and inventory management are all parts of the solution.

With kitting services, re-packing services, wrapping and all types of final step packaging services CSA Packaging can be a part of your Supply Chain Solution.


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