Will Supply Chain Issues Be Resolved in 2022?
As we enter the second year of pandemic-related supply chain challenges, companies and consumers alike are wondering when things will return to normal. Will the delays and disruptions in the global supply chain be resolved in 2022? What progress has been made and which issues remain to be addressed? Like most companies across the U.S., AVO Fence & Supply is eager for answers to these questions. Let’s look at the key elements of the lingering supply chain crisis, and what AVO Fence & Supply is doing to minimize the impact to their customers, such as investing in inventory for all materials early on.
How did we get here?
- The pandemic shut down or slowed production around the world, most notably in global manufacturing centers like China, Taiwan, and Vietnam. Expecting a sharp drop off in consumer demand and an impending recession, many businesses cut their orders, and shipping companies reduced their schedules.
- COVID restrictions and lockdowns varied from country to country in both timing and severity, putting pressure on the global supply chain and causing geographical shifts in supply and demand.
- However, consumer demand did not stop during the pandemic: it shifted. Work-from-home orders and restaurant shutdowns caused the demand for services to hit rock bottom, while efforts to support the economy, such as stimulus checks, caused the demand for manufactured goods to skyrocket. Some consumers took the money they would have spent on restaurants or entertainment and spent it on items like home office equipment and kitchen appliances.
- In addition, the ease of online ordering not only pushed the demand for goods far ahead of supply, but put tremendous pressure on businesses, which were having difficulty finding workers, securing suppliers, and meeting production schedules. Companies are still trying to catch up.
What’s the good news?
- While supply chain issues are still severe, they are not getting worse. In the U.S., the infrastructure bill will fund improvements to U.S. roads, bridges, ports, rail transit, and the power grid, which will ultimately help to improve the supply chain for years to come.
- The backlog at seaports is slowly improving. The U.S. Congress opened all ports for 24/7 operations, and the backlogs are beginning to ease. Los Angeles now has 40 percent fewer cargo ships in the queue than it did at the height of the crisis.
- Companies have stepped up to mitigate the current supply chain issues and improve internal processes to prevent future issues. For example, businesses have been actively upgrading their digital capabilities related to supply chain technologies for real-time visibility of inventory and better demand planning.
- Many companies are working to make their supply chains more reliable and resilient by building better relationships with suppliers and working to reshore suppliers.
- Businesses are embracing a variety of workarounds, including increasing production capacity, buying warehouses to increase storage space, chartering container ships, hiring e-commerce fulfillment operators, using alternative ports, and shifting from ground or ocean to air freight.
- Companies are reexamining their just-in-time inventory models, which have not worked as successfully during shortages of critical components.
What’s getting in the way of progress?
- Consumer demand for durable goods remains high, resulting in product shortages and higher prices.
- Container ships were severely affected by lockdowns and global border closures. Vessels could not dock where and when they planned, and containers were left in the wrong locations. Congested ports translate to timely unloading issues, and the result is containers are spending 20 percent longer in transit than before the pandemic. North American ports currently account for 80 percent of global shipping delays.
- Contract negotiations between the marine terminals on the West Coast and the dockworkers union are scheduled to begin in the spring. This could be a complicating factor in the resolution of supply chain issues in the U.S.
- Shortages of truck drivers, crane operators, and warehouse workers at seaports continue to hamper efforts to quickly resolve the backlog of container ships.
- Some companies are building their inventories to avoid future shortages and production delays. While this creates a buffer in a lean, just-in-time supply chain, it adds to the existing high demand, creating further bottlenecks.
- As countries around the world work to meet sustainability targets for emissions and other environmental commitments, actions such as consolidating distribution centers, or implementing electric delivery vehicles only create additional complexity to a compromised global supply chain.
What can we expect in 2022 … and beyond?
Most experts agree supply chain issues will continue through at least the first half of 2022. While they will continue to improve, they are not likely to be fully resolved this year. However, supply chain issues have captured the attention of top CEOs around the world, and most organizations are actively looking at ways to reconfigure and manage their supply chains to ensure growth and business continuity. Ports will eventually clear, freight rates will come down, and, hopefully, COVID restrictions will continue to ease. But the way companies manage their supply chains will be more reliable and resilient than ever before.
At AVO Fence & Supply, we have been aggressively increasing our stock of cedar by identifying new sources in various regions of the U.S. However, northern white cedar, the best and most common material for wood fencing in New England, remains difficult to source. In addition, costs for Canadian cedar have increased due to new U.S. tariffs, and while we use a number of local suppliers, stock continues to be limited.
To minimize production interruptions, we are actively adding to our inventory of vinyl materials as well. We are committed to doing our best to fill orders as quickly and efficiently as possible. As the world recovers from the supply chain crisis, we ask for—and appreciate—your patience and understanding.
If you have any questions about fences, contact us and we’ll happily discuss your needs and put our 150 years of experience work for you!