How Is The U.S. Supply Chain Changing & What Should Supply Chain Leaders Expect In 2023?

To expedite and reduce expenses concerning the delivery of products, a major restructuring is taking place in the United States supply chain. From apparel to automobile parts, almost all merchandise made overseas arrives by cargo vessels docking at US ports.

Last year's holiday season provided a cautionary tale for retailers when goods became stuck in the Pacific Ocean off California, resulting in 109 container ships still awaiting to be offloaded at the Ports of Los Angeles and Long Beach. After being left with empty shelves, this nightmare scene forced retailers to reroute their supply chains elsewhere. Consequently, prices went up due to an imbalance between demand and supply as Americans encountered difficulties obtaining goods.

Impact Of The Congestion On US Supply Chains

The port congestion crisis has had a noticeable impact on the US supply chain but its long-term effects are yet to be determined. As reported by the IMF's forecast, manufactured goods demand is anticipated to grow by 2.6% between now and 2024 - however, manufacturers have been unable to keep up with these demands due to shortages in global supplies. Some of the short-term implications include:

Raw material shortages

The onset of 2020 brought forth a wave of raw-material shortages, yet the US saw some major growth in 2021. Unfortunately, that is not likely to last as there will soon be another shortage crisis throughout the year. Businesses are now bracing themselves for an even greater decline in raw materials and supplies.

Limited stocks

As the world continues to deal with ongoing pandemic disruptions, imported items from leading brands may not be accessible for a short period due to scarcity and shipment delays.

Increased management costs

The US supply chain sector is already feeling the strain of rising container prices, regular disruptions, and more - leading to an unprecedented rise in management costs. Now though, with the port congestion crisis occurring at the same time, these expenses are going to soar even higher.

Increased shipping costs

US businesses, from importers to exporters, are likely to bear the brunt of congested ports and escalating shipping costs. Transportation expenses between points will unavoidably surge due to these sharpening rates.

New Research Forecasts The State Of U.S. Supply Chains In 2023

According to a recent survey, senior executives believe that the tremendous supply chain troubles and interruptions American companies have dealt with in recent years are far from over.

A staggering 52% of those surveyed believe that their supply chain needs further upgrading, and 49% anticipate these existing issues to persist until the end of 2022. Moreover, a third anticipates them to last up to summer 2023. Here’s why:

Global Political Unrest Is The Main Factoring Causing Current Supply Chain Issues

Business directors pinpoint international political disturbance (58%), shortage of raw materials (44%), and rising fuel costs (40%) as the primary sources of their current supply chain difficulties. Interestingly, only 31% attributed it to inflation.

The Top Three Supply Chain Disruptions Business Leaders Expect In 2023

• Reduced availability of raw materials in the United States (50%)
• A slowdown in the construction of new homes (44%)
• Disruption to public transport due to lack of drivers (44%)

The pandemic shook up consumer buying habits and businesses were not ready for the resulting financial pressure. Almost half of the business leaders reported supply chain problems leading to a major financial blow from the start of the pandemic, including:

• A decrease in revenue (58%)
• Forced to take new financing measures, such as business loans (54%)
• Inability to pay employees (50%)
• Missed rental payments (42%)

With the additional expenses of supply chain issues, 61% of business leaders report that they have been forced to resort to wage or recruitment freezes, and 50% state they've had no choice but to reduce staff. As an alternative measure, only 41% opted for a price increase in their products or services.

Businesses Are Preparing Their Supply Chains For The Future

All organizations acknowledged that their supply chains require improvement, and they are taking drastic steps to make sure they will be ready for any potential disturbances while securing their supply chain. Business leaders plan to:

• Adopt new technology to overcome challenges (74%)
• Implement new contingency measures (67%)
• Prioritize U.S.-based supply chain solutions (60%)
• Find new environmentally friendly supply chain solutions (58%)

An overwhelming majority of businesses (64%) are transitioning from the "just-in-time" supply chain to the more reliable "just-in-case" model, which involves storing increased amounts of inventory. Even with those already making this shift, 63% believe that it would be beneficial for the entire United States to adopt this strategy as a precautionary measure against potential future crises.

Strategies To Combat Global Uncertainty In The Supply Chain

• Monitor worldwide events closely and anticipate potential impacts on your supply chain, so you can stay proactive instead of reactive.
• Prepare yourself for any potential impacts, like new tariffs or trade regulations enforced by countries, that could occur in the wake of these events. Create backup plans to help navigate through those changes.
• Diversify your product sourcing to quickly adapt to changes in international relations while protecting the stability of your supply chain. Having multiple sources of supply is essential for minimizing potential supply chain disruptions.
• Make the most of today's technology to supervise and control your supply base more effectively. Leverage AI, ML, and robotics automation software for a comprehensive view of data like supplier risk ratings or IMIS. Automated real-time collection and access will provide an edge over the competition so that all supply chain stakeholders can make informed decisions quickly.