Global Supply Chain Remains Dim for 2022
One month into the new year, and relief throughout the 2022 global supply chain is hard to come by. In nearly every facet of the supply chain ranging from raw materials sourcing to inventory manufacturing to shipping, organizations are experiencing shortages, delays, and rising prices. As data continues to accumulate, it is becoming increasingly clear that these issues will remain — and possibly worsen — well into 2023.
Congestion at ports, for example, made national news earlier in 2021. At the ports of Los Angeles and Long Beach, which handle 40% of U.S. imports, 40 container ships were idling offshore and waiting for berths on Feb. 1, 2021. A year later, however, there are 101.According to Matthew Cox, CEO of Matson in American Shipper, trans-Pacific congestion and elevated consumption trends should “remain largely in place through at least the October peak season and elevated demand…for most of the year.”
Efforts to spur relief have all the way to the White House. In January, the Biden Administration announced several key findings from their 100-day review of America’s supply chains, as well as what its short-terms plans are to “strengthen American supply chains promote economic security, national security, and good-paying, union jobs here at home.”
Particular attention is being paid to the electronic components and semiconductor supply chain. These initiatives include:
• Department of Commerce (DOC) support for $75 billion direct investment into domestic semiconductor manufacturing and research and development. According to the report, “DOC will bolster its partnership with industry to facilitate information flow between semiconductor producers and suppliers and end-users. Leveraging the Department’s convening power, including through its advisory committees, DOC will bring stakeholders together to promote improved transparency and data sharing.”
• Support for $17 billion in U.S. semiconductor investments by leading companies in the Republic of Korea.
• More recently, the House in planning to vote on new legislation that would boost domestic production of semiconductors domestically, investing billions in production, manufacturing, and scientific research throughout the U.S. The Senate has already approved the legislation with a bipartisan 68-32 vote. The bill includes a total of $52 billion in U.S investment over a five-year period.
Additionally, the Federal Acquisition Regulatory Council plans to issue a proposed rule to develop a new process for preferencing critical products that are in manufactured products or component parts, which are cited under the Buy American Act. This will leverage the buying power of the nearly $600 billion in federal contracting to strengthen domestic supply chains for critical products.
Despite these initiatives, however, little is expected to change in the global supply chain in the short term. According to Taiwan Semiconductor Manufacturing Company CEO C.C. Wei, “capacity [is] expected to remain tight throughout 2022” as demand continues to soar — largely due to rapid global adoption of 5G.
“We expect shortages and supply chain issues to remain front and center for the first half of the year, hopefully easing by the back half, but with longer lead times for some components stretching into 2023, possibly well into 2023,” says a recent industry report from Deloitte.
For 2022 and beyond, the need for comprehensive supply chain solutions that minimize costs while largely avoid supply chain disruptions remains incredibly high. For more information on how Partstat’s Inventory Ownership Solutions can improve your supply chain, contact a Partstat representative.