7 Emerging Supply Chain Risks in 2022
By Hugo Britt | May 12, 2022
Supply management professionals have had a tough couple of years. Between trade wars, natural disasters, and the COVID-19 pandemic, even the greenest supply chain managers have been fast-tracked and turned into hardened veterans.
But the challenges continue. Below, we share seven supply chain risks to consider in 2022.
Emerging supply chain risks
According to the Economic Policy Institute, the number of people involved in major work stoppages surged from 27,000 in 2020 to 80,700 in 2021. While this figure is below pre-pandemic levels, strikes are having an impact when combined with other risk factors such as global shipping challenges.
Reasons for striking are many and complex. The pandemic is a major factor, coupled with the Great Resignation and the fact that many essential workers feel expendable and under-compensated. As a result, companies all along supply chains are struggling to fill positions and suffering increasing delays.
U.S. trucking companies recorded a deficit of 80,000 drivers in 2021. With 72% of freight transported by truck, this is causing massive supply chain disruption. The driver shortage is unlikely to improve without major reforms including higher wages and better conditions.
War and geopolitical risk
The Ukraine war has already contributed to higher fuel prices, rising inflation, and unexpected price increases in products such as breakfast cereals. While the war Ukraine appears to be entering a stalemate, trouble in other geopolitical flashpoints around the world such as the Strait of Hormuz or the South China Sea will cause prices to soar and supply chains to choke.
According to the BLS Consumer Price Index, prices across the board have increased by 8.5% as inflation continues to rise to the highest levels since the 1980s. Reasons for inflation include pent-up consumer demand for goods as the economy reopens after COVID-19, along with the economic impacts of the war in Ukraine. In effect, inflation means that one’s dollar doesn’t go as far as it used to.
This causes a double-threat for businesses:
- Supply costs increase
- Customer spending decreases
Port congestion and global shipping challenges
Ports are sensitive operations that can be easily disrupted. A Royal Bank of Canada study found that an incredible one-fifth of the global container ship fleet is currently stuck in congestion at major ports around the world. This leads to domino-like effects including ships arriving months late (further disrupting port schedules), rising shipping costs, and a shipping container shortage.
Warehouse space shortage
Organizations attempting to stockpile goods to hedge against supply uncertainty are driving a shortage in warehouse space across the U.S., leading to higher competition for space and rising rents. The pandemic-inspired surge in eCommerce means new warehouse space can’t be built fast enough, with every $1 billion increase in online sales equating to a need for an additional 1 million square feet of warehouse space.
Together, soaring shipping and warehousing costs will inevitably mean higher prices will be passed onto consumers.
Globally, cybercrime caused an estimated $6 trillion in damage in 2021, up from $3 trillion in 2015. A cyber attack occurs every 11 seconds, including highly disruptive and expensive ransomware attacks (causing $20 billion in damage in 2021).
Supply chains are particularly vulnerable to cyber threats. This risk can be mitigated by making third-party risk management a priority and identifying supply chain vulnerabilities. Assess the potential of hard-to-hack technologies for supply chain transactions such as blockchain.
Partner with a GPO to combat supply chain risks
Partnering with a group purchasing organization is a proven strategy to help combat the supply chain risks businesses are facing. GPOs help reduce supply chain risk by diversifying your supplier base, improving supplier relationships, and decreasing the amount of time it takes to source goods and services thanks to pre-negotiated contracts that are readily available.
As a GPO, Una offers these services to our members free of charge, meaning you can easily access more options when it comes to procuring the items you need to ensure business continuity, and reducing the overall impact these challenges pose to your business.
Experiencing supply chain woes? There’s safety in numbers. Get in touch with Una to discuss the power of group purchasing and the benefits of joining a group purchasing organization to help navigate supply chain uncertainty.
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