The COVID-19 pandemic was a Black Swan event for the entire world, and especially impacted the supply chains of an increasingly inter-connected global industry. Supply chains around the world, not only in India, have faced unprecedented challenges over the last two years. With every passing month, the dynamics of the market changed, leading to changing challenges for this vital link.
The supply chain continues to be in crisis in the new year. In addition to port congestion, supply chain companies are facing a series of shortages in containers, labour, and transport equipment and these challenges are expected to persist for a long time to come.
Industry experts say that companies need to embrace technologies to withstand the known and unknown challenges of the present and future supply chains and help ensure business continuity.
“In 2021, we saw massive global supply chain challenges, and some of them will continue even in 2022. Different parts of the world have experienced supply chain issues that have been aggravated for different reasons. For instance, power shortages in China have affected production in recent months, while the UK and the US are facing a shortage of truck drivers, as is Germany, with the former also experiencing large backlogs at its ports,” says Renu Bohra, CHRO – India and Indian Subcontinent, DB Schenker.
The shipping industry is also facing challenges because of congestion in the ports, leading to a bottleneck that impacts the overall import-export operations. “The other challenges also include rising freight prices, transport services being impacted due to labour shortages, as well as high container and warehousing costs, all of which contribute to hampering the overall global production,” she adds.
Bohra says some of these struggles will be eliminated with time and others, which are more permanent, "will change the way we think about supply chains, making it quintessential for the supply chain companies to adopt the new ways of working and address these challenges".
"For companies to survive the supply chain struggles in 2022, they should be decisive in making the necessary changes to adapt to new challenges, along with adopting new technologies and automation like AI, ML and IoT for a streamlined supply chain operation, ” she adds.
Bhavik Mota, Director, Regional Ocean Management, Maersk West & Central Asia says a lot of the supply chain woes in the system today are due to the unprecedented demand for goods, especially in the western markets of the US and Europe. “The demand for goods, and therefore the demand for transporting them is very high. The supply of the space on vessels or the containers on the other hand is limited,” he adds.
This imbalance between demand and supply, combined with the pandemic-driven restrictions, has created unprecedented bottlenecks in the logistics infrastructure, leading to a shortage of containers and vessel space. “This continues to be the biggest challenge for India as the Indian exporters struggle to deliver their goods in the global markets,” says Mota.
“Freight rates are a function of demand and supply. With the demand extremely high and the supply of space in terms of containers or on vessels limited, freight rates are going up,” he adds.
There is a major shift in consumer behaviour that is also seen – from offline shopping to online shopping. Mota says this is forcing India’s supply chains to recalibrate themselves to be able to cater to rising eCommerce. The need for warehousing is, therefore, going up.
Mota adds that large manufacturing facilities are going from ‘just-in-time’ to ‘just-in-case’ in order to be resilient enough to face unknown crises ahead.
The overall supply chain ecosystem still faces the challenge of lack of adequate digitalisation. “While the pandemic did give it a push, it is not fast enough with a lot of resistance across stakeholders of supply chains and this is slowing down the transformation that the sector desperately needs,” says Mota.