Manufacturing, ports...why do you think supply chain disruptions will continue in 2022?

　　The highly synchronized global supply chain system developed over the past 30 years is facing unprecedented pressure.

Will this situation get better in 2022?

　　Market research firm IHSMarkit pointed out in the latest report "Supply Chain Disruption: Why It Will Continue to Happen in 2022" that in 2022, solving the problem of supply chain disruption will no longer be a "sprint" model, but will evolve into a well-run " Marathon" schedule mode.

　　“The changes taking place in global supply chains are not only disruptive, they are historic,” said Daniel Yergin, vice-chairman and vice chairman of IHS Markit. “The focus on inflation also adds to the urgency of understanding the outlook for supply chains in 2022. "

　　While the outbreak has been an important factor driving disruption, such as the current Omicron strain creating new uncertainty, it is not the only factor, the report said.

In addition to the pandemic, there are numerous challenges for capacity building, logistics and workforce.

　　The report is divided into chapters to detail the manufacturing, ports and other fields.

On the manufacturing side, the report argues that there are now early signs of normalization following the unprecedented supply disruptions in 2021; however, with regard to severely congested ports, there is no guarantee that the sector will recover quickly, at least in the first half of 2022. to pre-pandemic levels.

Early signs of normalisation in manufacturing

　　The report pointed out that in 2021, the global manufacturing delivery time will be significantly longer.

In January 2022, many more companies reported severe output constraints, input costs rose at a record rate in the pre-pandemic decade, and the Omicron strain brought new uncertainty.

　　The sector remains largely under pressure from supply bottlenecks and pandemic-related uncertainty, but there are already some signs that things are starting to improve, according to IHS Markit's latest global manufacturing PMI survey released earlier this year.

The incidence of global supplier delays in deliveries was the lowest since March 2021, allowing global factory output growth to accelerate to the fastest pace since July.

　　Importantly, production growth has lagged demand growth to an unprecedented degree in the preceding months.

This is due to shortages of staff and materials, and the factory simply cannot produce all the products that customers need.

But now, production and demand growth have returned to roughly the same level.

　　However, against the backdrop of unprecedented supply disruptions, supplier lead times have never historically been stretched as far as 2021, according to a 30-year survey of purchasing managers by IHS Markit.

Heading into 2022, while things improved slightly, companies reporting output constrained by shortages were still 3.5 times the long-term average.

In addition, the increase in average supplier delivery time has eased, but it is still well above pre-pandemic levels.

　　These shortages create a seller's market.

There was some welcome cooling in industrial price pressures in December 2021 as supply bottlenecks eased, but manufacturing input costs still rose faster than they were in the decade before the outbreak.

　　In addition, the latest PMI survey data coincides with an accelerating increase in the number of cases caused by the Omicron strain, which raises the possibility of further disruptions to global production and supply into 2022, and may be amplified by lockdown policies in some countries. possibility.

　　As a result, IHS Markit said the agency continued to cut its global economic growth forecast and raised its inflation forecast.

The longer the outbreak affects supply chains, the weaker the growth prospects.

Back in mid-2021, the agency had forecast global gross domestic product (GDP) growth of 4.5% in 2022, but now it has fallen to 4.2%, largely because inflation has been more severe than expected.

　　Meanwhile, IHS Markit's 2022 business outlook survey of 12,000 companies shows that companies' profit expectations are the weakest so far in the pandemic.

There is widespread concern that price hikes, supply shortages, customer resistance to higher prices and the inability to pass costs on to customers after a year of sharp price increases will all hurt margins.

　　The report also cited the automotive industry in manufacturing as an example, noting that in 2022, analog chips will be a worrying factor in the industry, and semiconductor products will continue to experience some production disruptions. "Regarding chip shortages, it is certain that In 2022, this phenomenon will continue. The typical lead time for semiconductors is 12 weeks, now it has reached 26 weeks or more, and it may be extended, which will have an impact on the decision-making of automakers.” The report. say.

　　The report further notes that these recent supply chain shortages have forced automakers to "betray" the well-known Toyota Code of Conduct (TOYOTA) against a well-established model of supply chain management that has been established over the past 30 years. Way)".

Toyota's "TOYOTA Way" is based on the premise of lean supply, the less inventory the better.

　　Right now, automakers are considering "stocking up" on certain parts because the cost of expanding inventory is nothing compared to the cost of shutting down production lines.

If the production line is down for a week, it costs an OEM (original equipment manufacturer) more than $50 million.

　　Container shipping: supply chains still affected by 2022

　　In the maritime sector, the container shipping supply chain is still in the midst of its worst crisis ever at the start of 2022, and it may take months to unwind.

　　The report notes that, to be sure, measures to curb the congestion have been successful in some micro-areas.

For example, the number of long-term containers at the Port of Long Beach, California, has decreased by nearly 50% since October, but as of early January 2022, there were still more than 100 container ships waiting for berths outside the Port of Los Angeles and Long Beach.

Before the pandemic, that number was much less -- literally "zero."

　　As of Tuesday, Southern California Marine Exchange data showed that 91 ships were still berthed outside the ports of Los Angeles and Long Beach, 14 fewer than the record 105 ships on Jan. 6.

The first financial reporter checked the historical data and saw that the number of waiting for berthing in the same period last year was only about 30.

　　As U.S. consumer spending shifted from services (travel, leisure and entertainment) to home improvement during the 2020 lockdown, the report said, the container supply chain, from brick-and-mortar stores to e-commerce, was immediately placed under unprecedented strain. .

E-commerce growth that was supposed to take place in five to seven years has been squeezed into one year.

E-commerce requires distribution centers, and the capabilities of distribution centers cannot match.

But even now, the U.S. is still unprepared in terms of distribution capabilities.

　　Second, a number of stimulus programs launched by the U.S. government have boosted spending power.

This has resulted in a nearly 20% increase in U.S. containerized imports in 2021 compared to 2019.

However, in this situation, the shortage of shipping capacity has exacerbated the crisis in the container supply chain.

　　Both ocean carriers and forwarders said there were enough ships and containers to handle the surge in demand, the report said.

But the problem is that the capacity is not being used effectively and the cycle is slow.

　　The report estimates that 10-15% of capacity is wasted due to congestion.

This is evident in freight rates: spot container freight rates have risen three to five times compared to the previous year.

　　Peter Tirschwell, vice-chairman for marine and trade at IHS Markit, said that while there had been some news in the past few weeks that the supply chain crisis was easing, no evidence of this had been seen after 2022, at least for containers Liquidity is yet to be seen.

　　Tashville said a recurring problem since the pandemic is that after a shock, the overall maritime system is difficult to recover, and then the next shock will come.

　　For example, the system has no chance of recovering from the six-day closure of the Suez Canal in March 2021.

He explained that new disruptions, such as the Omicron strain, could further disrupt the system and create a "hard-to-get" phenomenon for containers.

For this reason, it is still unlikely that the maritime industry will return to its pre-pandemic state until at least the first half of 2022.