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The Supply Chain May Be Opening Up Featured

The Supply Chain May Be Opening Up "Coming soon stock image "

The disruptions in global supply chains in the past three years were unprecedented. It led to soaring inflation across many parts of the world. This has forced central banks to change their policy stance, raising interest and borrowing costs. Amid the pandemic, rising tensions in different areas in the world have worsened the situation. Furthermore, there have been a switch in demand for services and manufactured goods in the US and lockdowns that have reduced the manufacturing abilities in leading manufacturing hubs such as China. These two factors have occasioned supply chain disruptions never witnessed before. However, the good thing is that things are showing signs of easing. Here are some examples of changes being experienced that show that the supply chain may be opening up at last. 

  1. Shipping costs are now close to pre-pandemic levels

Freight rates in major routes globally hit a record high during the pandemic. This led to uncertainty in the supply chain. Over the past six months, freight rates along key supply chain routes globally have fallen sharply, indicating the surge in demand for specific products in manufacturing hubs such as China. This further indicates that the demand for manufactured products may be easing, and so is the congestion in ports as goods waiting for distribution keep reducing. The congestion in ports also contributed to the rise in freight charges during the peak of the pandemic.

  1. There is an increase in spending on recreational activities

Everyone worldwide received a heavy economic beating as others lost their jobs and companies suspended their operations. However, things have eased, and companies seem to be hiring again. This can be seen from the rising consumer spending on goods which reports indicate to have grown steadily compared to the early days of the pandemic. Similarly, spending on recreational activities has increased substantially today, unlike during the pandemic’s peak. For services, consumer spending rose to $11 billion from $10 billion up in April.  

  1. Shipping costs of goods like iron ore and coal have gone down

From the drop of vessels such as Panamax-sized ones, whose primary role is to ship US grains across the world, it is evident that the value is dropping. From research, vessels have dropped from 3,500 during the pandemic’s peak to around 1,500 towards the end of 2021.

China, the leading importer of various commodities like metals such as copper, iron ore and coal for the manufacture of different products, have resumed their operations in manufacturing. This has reduced the congestion in ports, and the costs of these metals have decreased compared to the peak. Copper prices are often considered a barometer of growth.

  1. Waning demands

Analysis of digital trade shows that activity in retail, manufacturing and transport & logistics has dropped significantly this year. Accordingly, The Index of Global Trade Health report by Tradeshift indicates that global supply chain activity fell by 5% during the same time, with new orders slowing as uncertainty increases. This is good news for supply chain and logistics companies as bottlenecks ease and shipping costs continue dropping to the normal level pre-pandemic. However, this is not to say that things are completely back to normal. It will take a while before we can see the pre-pandemic supply chain efficiency.

Furthermore, the pandemic has forced companies in the sector and governments to rethink their approaches completely. The challenges witnessed have exposed the weaknesses of modern supply chains and shown the need to have measures to enhance resilience. As such, although things appear to be moving in the right direction, work needs to be done to get the best and remain functional in case of another pandemic or disaster in future.

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Scott Koegler

Scott Koegler is Executive Editor for PMG360. He is a technology writer and editor with 20+ years experience delivering high value content to readers and publishers. 

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