May 18, 2022
Updates to 2022 Supply Chain Issues (And Solutions)
This blog post was originally published by Deliverr, which is now Flexport. The content has been adjusted to fit the Flexport brand voice and tone, but all other information remains unchanged. With the merging of Deliverr’s services (DTC fulfillment, B2B distribution, and Last Mile delivery) into Flexport’s existing international freight and technology services, we’re now able to provide merchants with true end-to-end logistics solutions spanning from the factory floor to the customer’s door.
77% of companies are experiencing year-over-year supply chain disruptions as a direct result of the pandemic. Predictions went from optimism for improvement to concern that struggles would be permanent. At the end of last year, we predicted supply chain woes would continue well into 2022 and beyond. From product availability and pricing to labor shortages and environmental concerns—merchants are still scratching their heads about whether there’s a light at the end of the tunnel.
Updates to 2022 Supply Chain Issues (And Solutions)
As the global supply chain becomes even more convoluted, the most successful businesses are growing resilient with modern solutions.
You can’t predict when crises will happen. But you can control how you respond to difficult challenges. Here’s how the industry is faring and key solutions to remain resilient:
1. Semiconductor and Raw Material Shortages Continue
Many everyday products including refrigerators, cars, and smartphones require small chips known as semiconductors to function. Semiconductors first experienced shortages when global lockdowns went into effect. Despite the world opening up again, a long, complicated production process is the main cause of delays and shortages.
According to the World Economic Forum, “typical lead times can exceed four months for products like semiconductors that are already well established in a manufacturing line. Increasing capacity by moving a product to another manufacturing site usually adds another six months (even in existing plants). Switching to a different manufacturer typically adds another year or more.” Below is a visual sourced from McKinsey & Company showing that the average time it takes to develop and produce semiconductors is several months.
Another reason the semiconductor shortage continues to be a considerable problem is the war between Russia and Ukraine. Ukraine is the world’s leading source of neon which is needed for lasers used in the semiconductor-creation process. Copper, aluminum, steel, and resins are also experiencing record-high prices.
Solution: Be transparent with customers about material shortages
If your product has semiconductors in it, you’ll likely continue to see issues with product availability. You’ll also need a plan if your product relies on any of the raw materials listed above. The key to keeping your customers happy even during global shortages out of your control? Transparency and honesty.
Start by using data and supply chain management technology to stay in the know about product availability. As soon as you know about availability issues, communicate clearly with your customers. When your customers know what shipment times to expect, they’re less likely to be upset.
2. Gas Prices Reach a Record High
U.S. gas prices continue to soar and eCommerce merchants are taking the biggest hit. Major carriers like FedEx and USPS are passing the cost of fuel onto merchants in the form of surcharges. Worst of all, these fuel rates change weekly based on the current average price per gallon. For those that like to plan, it becomes impossible to predict what extra costs you’ll incur each month.
Solution: Combat rising fuel prices by partnering with a 3PL
Third-party logistics providers (3PLs) can help you combat fuel charges in 2022. Because of their established relationship with carriers and the number of shipments made, 3PLs have the upper hand when it comes to negotiating competitive rates. Below is a breakdown of the potential surcharge costs incurred when using UPS Ground in 2022:
Flexport offers transparent pricing so your team is never left guessing how much you’ll pay. We negotiate on your behalf to find the most competitive rates. By entrusting your shipping needs to our team, you no longer have to coordinate with multiple providers to decipher fuel surcharges. We take the onus to ensure you’re getting the best bang for your buck.
3. Labor Shortages Widen
Despite the economy making a comeback in recent months, labor shortages continue to widen. The United States hit a record of 4.53 million employees quitting their jobs in March 2022. This hit the supply chain hard as many organizations are struggling to fill empty positions in trucking and warehouse operations—necessary roles to run a successful eCommerce operation.
Solution: Implement automation when possible
Turn towards automation whenever you can to reduce your workload. Plenty of supply chain management tools exist that help decrease the amount of labor needed. Or you could turn to a third-party logistics provider (3PL) that manages the entire process for you.
Overcoming the 2022 supply chain crisis requires strategy
The New York Times (paywall) writes, “Time alone will not solve the Great Supply Chain Disruption.” It requires innovative logistics solutions to invest, develop, and enhance technology, as well as more workers, more warehouse spaces, and a refashioning of the current structure.
3PLs like Flexport can help your product through every stage of the process—from packing and preparing orders, to getting it on your customer’s doorstep. We’re experts at supply chain management and we’re here to help ease your stress and lessen the burden as the supply chain crisis continues.
Get in touch to learn how Flexport can enhance your logistics operations.
The contents of this blog are made available for informational purposes only and should not be relied upon for any legal, business, or financial decisions. We do not guarantee, represent, or warrant the accuracy or reliability of any of the contents of this blog because they are based on Flexport’s current beliefs, expectations, and assumptions, about which there can be no assurance due to various anticipated and unanticipated events that may occur. This blog has been prepared to the best of Flexport’s knowledge and research; however, the information presented in this blog herein may not reflect the most current regulatory or industry developments. Neither Flexport nor its advisors or affiliates shall be liable for any losses that arise in any way due to the reliance on the contents contained in this blog.