S & P Global Markets Financial Intelligence recently released a report that makes the case for supply chain normalization in the second quarter of 2023.
the report comes at a time when U.S. import levels are falling, largely due to higher-than-normal inventory levels, reduced consumer demand and still stingy inflation. However, as the report observes, much of the normalization of supply chains is viewed through the current situation compared to the situation before the pandemic.
"2023 is a year when the global supply chain is divided into two halves," Chris Rogers, head of market intelligence supply chain research at Standard & Poor's, wrote in the report. "In the second quarter of 2023, the normalization of the supply chain will continue after the end of 2022. By late 2023, post-pandemic corporate strategies should be clearer and global policy uncertainties may be resolved.
The report points out various examples in global supply chains based on various indicators and problems, including:
Global trade activity is expected to slow down supplier delivery time reaches the best level since July 2019. There are signs that seasonal shipping patterns are normalizing, although they will not be confirmed until the end of the third quarter of 2023. The electronic product supply chain is still interrupted.
is measured by the inventory-to-sales ratio and the purchasing manager's assessment, and the enterprise's inventory is close, but not completely at normal levels. It is too early to assess whether, in case it will replace timely as the main strategy for inventory management;
The return plan is a multi-year process, and there are signs that mainland China may win back some products lost market share.
Ukraine's ongoing conflict may reach a deadlock before the end of the year and may expand sanctions and secondary sanctions;
With the introduction of chip-like regulations, the global technology supply chain bifurcation continues, but a complete decoupling is still unlikely.
tensions between the European Union and the United States are being resolved. And the EU's Carbon Border Adjustment Mechanism (CBAM) was launched in October and a reporting request was made. Steel and aluminum suppliers in mainland China and Vietnam may be seriously at risk.
Rogers said in an interview that the global supply chain has come out of a historic period of interruption, especially the logistics network in North America. But he added that it is important to note that in the past few years, real supply chain stability is far from a given.
"In 2015, we talked about strikes, and in 2016 we talked about a sharp decline in China's economic activity," he said. "In 2017 and 2018, we were talking about tariffs that were imposed by former President Trump. Then we stumbled into a pandemic, followed by a war. At the same time, German ships were trapped in canals and strikes. There really is always something. It's almost like the supply chain manager's inability to rest for a permanent feeling.
on supply chain normalization, Rogers explained that epidemic-driven demand is putting pressure on the system, making shippers unable to withstand incidents like strikes by west coast port workers. At times of severe congestion in ports, for example, 100 ships are waiting to be unloaded offshore. He observed that the reason is that when the supply chain system is not under pressure in the same way, the pressure and related threats are much lower.
Rogers said: "A strike on the West Coast [for shippers there] would be horribly damaging, but there are many alternatives to get around it, like crossing the East Coast. "We have seen a lot of supply chains adapt to this.
More importantly, from the 2023 halves, supply chain normalization is related to the normalization or return of basic economic conditions.
"The second half of this year is about demonstrating whether we will enter the old normal or the new normal of how people run supply chains," he said. "There has been much discussion about the need for a flexible supply chain. What does this involve? It involves holding more stocks and procuring from multiple countries. These are very expensive... we are heading for, if not a recession, then definitely a slowdown. Will your shareholders and banks be excited about bundling a lot of cash in inventory or multi-source? This is what the new normal should look like. This will be the second half of this year, when we get enough "clean signals" from the data to see where we actually end up.
Source: Shipping Magazine