What're the next challenges for the supply chain

​2023 update:

There has been a lot of articles and discussions regarding the question “is Vietnam the new destination for manufacturing supply chain?” 

The answer is an unsurprising (or surprisingly) yes from many experts.

According to Ashley Hudson, the CEO of Global Retail, she said that after what the whole industry has been through in the past 3 years, everyone from all around the world is looking for alternative supply chains to further SECURE their supply chains. Vietnam is even being given the name “The New China”.

However, it is also important for us to realize the other side of the situation. Although Vietnam’s economy is heating up, quoting Vietnam Briefing, “Vietnam, like many other countries, is suffering from higher oil prices, tight coal supplies, inflation, effects of the Russia-Ukraine conflict, and lockdowns in China. Citing these factors, the World Bank has projected that Vietnam’s GDP growth to a modest 5.5 percent.”

Although Vietnam is being named “The New China”, China remains the global leading manufacturing hub. While much of the world is making this transition from China to Vietnam, let’s not forget that Vietnam still heavily relies on China’s output of raw material, and with recent stringent restrictions and minimal port movements, the shortage of containers continues and highly likely to bleed into Q1 & Q2 of 2023.

Many of the problems posed by COVID-19 still exist and remains a lasting negative effect in many businesses with shortage of labour being one of the leading problems.

Nonetheless, the future for Vietnam is looking highly promising and is definitely on the course to being the world’s leading manufacturing hub in no time.

2021-2022 update

Supply chain disruptions are a persistent theme in logistics and do not show signs of disappearing as issues are labeled the new normal. The hindrance of the global pandemic, consumer demand, and rocketing container prices have contributed to the setbacks felt throughout global supply chains and companies worldwide.  

Supply Chain Challenges- Port Congestion  

Covid-19 & port congestion  

The complication of port congestion occurs when a shipment arrives at a port but cannot load or unload as the station is already at full capacity. Due to the pandemic, labor shortages and social distancing protocol have meant that such services have been steered dramatically off course, creating significant backlogs at global docks, responsible for one of the top challenges to date.  

Subsequently, many suppliers have been unable to adhere to their delivery standards due to the lack of goods being sent out on time due to the extensive stockpile.  

China has also created global congestion issues by closing two important ports in its vicinity, impacting international trade massively. The closing and congestion in China's ports have had a knock-on effect throughout the US, Europe, and other countries worldwide, meaning businesses cannot attain, ship, and deliver inventory.   

Suez Canal disruption 

One of the largest ships in the world created mass shock within the shipping industry, blocking the Suez Canal, one of the shortest maritime routes from Europe to Asia. The blockage impacts industries such as trucking, grocery, department, and general warehousing due to the lack of received stock, and new financial challenges cost the global trade industry.  

Not only are profits made from many companies decreased due to lack of imports and supply chain losses, but overall economic GDP is at a downfall. It was reported that every shipment passing through the canal contributed up to 2% of Egypt's GDP, cutting down on 12% of the world’s global trade and costing up to $6-10bn a week.  

Separately, each vessel stranded held up to $9.6bn worth of resources, which cost $400m and 3.3m tonnes of cargo per hour. Port congestion as a whole created a significant impact on retailers and consumers alike, further creating supply chain issues.  

Supply Chain Challenges - Demand For Raw Materials  

Raw material downfall  

The overwhelming demand for raw materials has sent many manufacturers into downfall due to supply disruptions and lack of production. Raw materials have increased in demand since the pandemic. Most companies view this as more harm than good.  

There are many reasons. One big contributor is the low production rate from producers, which is caused by the decreased labour force. Many factories’ ability to create needed materials fell to an all-time low.  

Following the decreased production rate, the supply chain faces another problem: the lack of shipping containers. The lack of shipping containers stems from the unfortunate congestion at many ports, causing unnecessary holding of supplies and, of course, containers. What is worse is the, once again, lack of labour force to create inventory space, making it even harder for companies to find cargo space to ship out goods. 

Supply Chain Challenges- Impact And Forecast For The Future  

Supply chain forecast  

As the supply chain industry begins to recover from the harsh reality of the pandemic, the forecast for its foreseeable future seems to remain with one common theme, supply chain issues. For manufacturers to plan, a projection of possible new challenges and issues enables many companies to make informed decisions on ensuring supply chain organizations stay ahead.  

One forecast for supply chain managers to look at is the likelihood of the major issues within the sector getting worse before they get better. The global manufacturing process is taking a setback as the combination of customer demand and port congestion in many countries means companies will have to wait for some time before this problem has vanished.  

Alongside this, global supply chains will also have to play catch up due to labor shortages, lack of containers, and warehouse space. These issues are upheld throughout 2022 as supply chain management takes time to understand and set tactics to tackle this ongoing crisis, such as ordering more containers and employing more staff to carry out such services.  

Amidst the raw material crisis, forecasts also show a rise in pricing for such materials throughout 2022. This follows the prediction of raw materials’ pricing to rise to 5-6% due to the demand and supply chain disruptions. Inflation within this sector is nearly 18% higher compared to two years ago. This is due to demand and companies starting again after the pandemic, therefore encountering strain that cannot be met with limited resources. All extra deliveries increased consumer interest, and lack of labour profoundly impacted supply chain management, meaning pricing for inventory continues to surge to meet the coveted stockpile.  

Throughout 2022 -2023 supply chains and the sector as a whole will continue to face such issues. However, this is a valuable experience for all of us to build resilience. The supply chains’ problems now show that there is no quick fix for the issues faced and that time and sufficient technology and strategies will be the savior of this long-awaited difficulty.