The automotive and consumer electronics sectors were hit especially hard. By August 2021, order-to-delivery lead times for semiconductors increased to a record 21 weeks, for example, as car and consumer electronics makers scrambled to fulfill customer orders. But many of their suppliers were still experiencing their own pandemic-related delays. A third national lockdown in Malaysia – one of the world’s top semiconductor suppliers – cut production in the country by 60%, and outbreaks among workers forced multiple facilities to suspend production completely.
The long tail of the pandemic has continued to create problems for the logistics industry too, exacerbating supply chain stress points across many sectors. In China, the only major global economy still pursuing a “zero-COVID” policy, various outbreaks have led to the temporary suspension of operations at the ports of Ningbo and Yantian as well as at Shanghai Pudong International Airport, a major air freight hub.
Is respite in sight?
Will 2022 bring relief to global supply chains? Across much the world, we are starting to see signs that pandemic-related supply chain disruption is easing. First, the Omicron variant was less severe than some predicted. Many parts of the world and major economies are enacting or announcing an end of pandemic-era restrictions.
The pandemic is, of course, not yet over.
But while COVID-19 made a big impact in 2021, other disruptive events took their turn in the spotlight. Extreme weather events hit many important industrial regions, including a record-breaking heatwave in the western United States and Canada, and catastrophic floods in western Europe. Such disruptive events put further pressure on ports and logistics networks already stressed by high demand.
More recently, the conflict in Ukraine has upset global supply chains yet again, forcing the diversion of vessels and aircraft, shutting down production in affected regions, and pushing up already high energy prices, which puts further strain on companies in the chemicals and other energy-intensive sectors.
Open positions remain unfilled in many sectors, notably in critical logistics roles such as truck and van drivers. Industrial disputes have broken out around the world, with striking workers demanding better pay and improved conditions. Everstream’s report warns that labor-related challenges are only likely to intensify in 2022. Workers will have significant bargaining power in sectors already suffering from labor shortages, and the rising cost of living in many places will add to the pressure to raise wages.
Companies will need to understand the setup and operating practices of the companies in their supply chains, all the way back to the original source of raw materials. And it isn’t just labor policies that are receiving increasing scrutiny. Efforts to tackle global warming are increasingly focused on Scope 3 emissions generated along global supply chains, which means companies will need to monitor the carbon emitted by their suppliers, too.
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Improving prediction in the supply chain is currently a major area of focus for Everstream Analytics, says Gerdeman. The company has developed AI tools that aim spot potential problems early and provide users with actionable recommendations that help them avoid supply chain issues before they happen.
But if COVID-19 taught supply chain managers anything, it is unexpected circumstances have the power to expose crucial weaknesses in the system . “You are always going to have unexpected supply issues, and you are always going to get unpredictable surges in demand,” says Gerdeman. “The key to effective supply chain risk management is to ensure that the tools and the processes you put in place are not tied to a narrow set of specific events. They must be flexible and scalable so you can respond to whatever comes next.”
