Global Supply Chain Crisis Subsides

Jan 17, 2023Articles

Things are looking up in regard to the global supply chain crisis. As the world slowly recovers from the lingering Covid-19 pandemic there are signs that the global supply chain is getting back to normal. Despite some continued production disruption, supplies and goods are now successfully being delivered to manufacturers and distributors around the world.

We’re now seeing a significant reduction in cargo backlogs at major ports and overseas shipping rates have dropped to pre-pandemic levels. These are all good indicators that the demand is falling, and supply-chain congestion is shrinking. In a recent Wall Street Journal article, signs of supply chain recovery include:

  •  U.S. retailers have returned to stocking ample inventory.
  • A potential railroad labor strike was averted.
  • Trucking & freight companies now have ample capacity to make package deliveries.
  • The U.S. Postal Service, which makes last-mile deliveries for several package delivery companies, have expanded by adding new sorting machines to their operation to expand daily package processing capacity.
  • Some companies have gone so far as to reduce orders or restocking to avoid overstocking retail inventory.
  •  For some of the biggest U.S. manufacturers and retailers, current supply-chain costs have allowed them to spend millions of dollars less than it had anticipated on transportation and warehousing in 2023.
  •  Major retailers such as Walmart are exercising increased leverage with suppliers by declining price increases, asking suppliers to provide discounts, or even cancelling manufacturer orders.

But not all supply chains are returning to normal. Apple is dealing with hindered shipments due to the Covid restrictions in China. And Ford Motor Company has had to increase the price of its electric F-150 pickup truck multiple times partially due to supply-chain constraints and higher material costs.

We are certainly not out of the woods yet, but these new reports are encouraging. Some experts say the current challenge is to avoid expanding to more capacity than what customers need. But it is clear we are going through a significant inventory correction in the U.S. and Europe, with measurable capacity adjustments in and out of Asia.