4 minute read
STATE OF THE SUPPLY CHAIN
SUPPLY CHAIN TURBULENCE
SUPPLY CHAINS WILL REMAIN VOLATILE INTO THE NEW YEAR
Our global supply chain has been in turmoil since the COVID-19 virus appeared. As we slowly emerge from the pandemic, new challenges arise. The torrential rains and subsequent floods in BC are a good illustration of this, making it seem like there is no end. No matter how well prepared we are, we remain vulnerable to unpredictable environmental threats.
BC’s tragedy had a serious impact on local residents and across Canada, with Vancouver being our busiest port and gateway to and from Asia. Ironically, this happened right after the UN Climate Change Conference, the COP26, which took place in Glasgow from October 31 to November 12. The conference produced an agreement between 151 countries and commitments to mitigation and conservation efforts on deforestation, methane and financing of oil and gas projects but commitments from some countries were weak.
China, the world’s largest polluter, wasn’t even there. China currently consumes over half the world’s coal, burning three billion tons in 2020 and continues to build coal-fired power plants. One would have reasons to be skeptical about the COP26 outcome and whether it goes far enough. My impression is that world leaders are not ready to take the drastic actions necessary to limit climate change and we will see more of these weather-related disruptions in the future.
LOGISTICS HEADACHES
In logistics, we have plenty of challenges already: depending on the lane, ocean freight rates tripled or quadrupled, there are bottlenecks at ports, ships are full, ocean carrier schedules are less reliable, transit times are longer and unpredictable. And our exporters are greatly affected by a shortage of containers, as ocean carriers prefer to return empty containers to Asia, where they’ll earn much higher revenues on the inbound move back from Asia to North America, than on an export move from here. Airfreight is still problematic, with few options and high rates, and will remain so until more passenger flights take off.
Closer to home, a truck driver shortage remains an issue. Regarding transborder freight, it may get worse with the compulsory vaccination requirement for truck drivers coming into Canada effective January 15 next year. Similar measures have been announced in the US, where there are challenges against requirements to adopt vaccine mandates in businesses with over 100 employees. However, if vaccination remains our main tool against the
spread of this awful virus, we should just do it and stop arguing.
On the supply side, we experience raw materials and components shortages, long lead times and hefty price increases. Aluminium prices, for example, surged to a 13-year high in October. We know about rising energy prices when we fill up at the pump. The shortage of semiconductors and its impact on the automobile industry is well documented. All this creates headaches for buyers.
On the plus side, the position of supply chain professionals moved to the forefront. Few people in the public knew what supply chain meant until COVID-19 hit. The pandemic changed that as the world realized that the supply of masks and other protective equipment was concentrated in China. The giant containership stuck in the Suez Canal for a week in March with over 20,000 containers on board, delaying hundreds of vessels and the consequences on the world’s supply chains, was well publicized. With the BC floods, the supply chain is all over the headlines. It has been reported that the chief supply chain officer is the new C-suite star, as large brands are reinforcing their executive ranks with specialists to ensure that increasingly complex supply chains operate smoothly and sustainably.
What these trends mean for Canadian supply chain professionals going into 2022 is to be proactive in mitigating some of the risks:
Christian Sivière is president at Solimpex.
stay informed and connected with suppliers and partners; develop close partnerships; diversify our sources of supply with a so-called “Plan B” whenever possible; and encourage local production.
Reshoring or nearshoring to shorten our supply chain and lessen our dependence on Asian imports is an obvious tool. But bringing production back takes time and investment. US statistics demonstrate that it’s not happening yet as US-bound container imports set a record in October, with shipments up 15.2 per cent annually and up 34.7 per cent compared to 2019.
A new hurdle for many companies is the prohibition on the importation of goods mined, manufactured or produced wholly or in part by forced labour. In November, the CBSA seized a first shipment of women’s and children’s clothing made from cotton from China’s Xinjiang region. For now, it looks like supply chain professionals will have to keep their seatbelts fastened going into 2022. SP
