The major challenges for supply chains in 2022 | Kiowa County Press

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Edward Sweeney, Heriot Watt University

As Christmas approached, there was a lot of anxiety on the shortages festive meals and gifts. Trade frictions was already at the heart of the Brexit debate, and supply chain issues have been greatly aggravated by the COVID-19 pandemic.

For example, a shortage of computer chips had a ripple effect in many sectors. Concerns have also been raised about everything from lithium supplies to electric vehicle batteries at restaurant food supplies same coffee shortages.

Never has the issue of supply chain management been so important. The question now is what are the challenges that supply chains will face in the coming year. So what can we expect?

Complex, fragmented, under pressure

Products reach consumers through a chain of involved companies, which usually includes manufacturers, logistics companies – who provide storage, distribution and transport – and retailers. Unsurprisingly, the whole system is very complex.

There is a whole contemporary philosophy supply chain management (SCM) keen to make supply chains much more integrated than they were before. Well done, it can greatly improve overall business performance, while benefiting the economy and society. Yet this long-running effort to make the whole system more efficient has been set back by a host of challenges in global supply chains.

Three big issues became particularly apparent in 2021. The first, and probably the most obvious to many of us, was the unprecedented pressure on the global supply chains created by the COVID pandemic and the subsequent series of lockdowns and restrictions that varied in their timing and severity from country to country.

This has led to significant geographic shifts in supply and demand, which has created problems for finely tuned global supply chains. Trends that were apparent before the pandemic, such as increases in online shopping and driver and other skills shortages, now pose real problems.

Second, the economic and business environment has become more difficult. For example, in the UK and the rest of Europe, supply chain pressures have been caused by Brexit due to increased bureaucracy and cross-border controls. More broadly, companies continue to struggle with a range of international business challenges ranging from fluctuating exchange rates to building global leadership teams.

All of this matters because business has become increasingly international – often global – in recent years. This is due to the reduction of traditional barriers to the cross-border movement of goods, services, capital, people and information. The impact of this change on logistics and SCM is discussed my book Global Logistics: New Directions in Supply Chain Management.

Third, the environmental impact of logistics and supply chain activities is beginning to be better understood. If countries around the world are to meet their emissions targets and commitments, it is essential that they develop more sustainable supply chain practices. COP26 in Glasgow in November had a strong focus in the transports including freight and logistics. The status quo is simply no longer an option if a sustainable future is to be achieved.

But uncertainty is a feature of the international business landscape in which supply chains operate. As a result, large companies have focused heavily on supply chain risk management. This means identifying where risks of any kind exist in the network, assessing the potential impact of these risks and putting in place mitigation strategies. A range of formal methodologies and tools have been developed to support this process.

The big question is how to manage all this complexity, especially in terms of design, planning and execution. These challenges are new in many ways, so past experience cannot be relied upon to generate solutions.

An illustration of a supply chain from a man rolling boxes through various stages of transportation to an airplane.
Global supply chains are subject to a series of complex and sometimes volatile factors. Axel Wolf/Shutterstock

An unpredictable world

So what kinds of things are going to affect global supply chains in 2022? Like The Economist perfectly put recently, “the era of predictable unpredictability is not going away”.

The arrival of omicron was a timely reminder of the unpredictability of the pandemic. The emergence of new variants in 2022 could accentuate some of the current pressures. In this context, China continues zero COVID strategy with its strict border restrictions could create problems.

Despite some relaxation in recent months, international shipping costs expected to remain high in 2022. Closer to home, the arrival of full post-Brexit customs controls introduced on January 1 introduced new frictions and additional costs, with many companies reporting a worrying situation lack of preparation.

Importantly, freight transportation and supply chain processes will continue to change in 2022 as more environmentally sustainable practices are adopted. These practices affect everything from transport vehicles, such as the switch to electric delivery vans, to changes in the wider supply chain, such as the relocation of distribution centers to minimize distances travelled.

Industry and academia collaborate to develop innovative and sustainable practices, as evidenced by the work of the Center for Sustainable Road Freight, for example. The coming year will be instrumental in the adoption of these practices, each of which requires a change in the operational practices of companies. Such change will inevitably create short-term challenges as new practices are incorporated.

Businesses need to be resilient and able to adapt to major disruptions so they can develop long-term strategies and solutions to address these complex challenges. In the meantime, buyers will likely see higher prices, businesses pass increased shipping and other logistics costs for customers. We can continue to notice missing things of our supermarket shelves – New Year’s product shortages are already reported In some countries. So as consumers, we’re going to have to continue to be a little more resilient ourselves.

The conversation

Edward Sweeney, Professor of Logistics and Supply Chain Management, Heriot Watt University

This article is republished from The conversation under Creative Commons license. Read it original article.

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