02/20/2023

Supply Chain Issues a Continual Challenge for Industry

January 4, 2023
By Hector Rivero, President & CEO, Texas Chemical Council | BIC Magazine

Despite some easing of backlogs at the nation’s ports and reports of replenished inventory, supply chain woes are expected to persist.

Angeli Gianchandan, professor of marketing at the University of New Haven Pompea College of Business said, “Supply chain issues are here to stay... Everything is fragile now, our supply chain is fragile, our crops are fragile... Labor is fragile... Everything is colliding now. It’s the perfect storm.”

That storm includes:

• Natural gas disruptions related to the war in Ukraine
• China’s zero-COVID-19 policies causing manufacturing shutdowns
• The Mississippi River approaching record- low water levels and stranding barges
• A rail worker strike that could still hap- pen after members of the Brotherhood of Maintenance of Way Employees reject- ed the tentative agreement brokered by President Biden
• The trucking industry experiencing a shortage of drivers and chassis that could last through 2024

Complicating matters worse is uncomfortably high inflation and recession worries. Getting supplies flowing more freely is key to helping ease inflation. However, the Labor Department reported that the Producer Price Index rose more than expected in September. Natural gas prices are at their highest levels in 14 years.

An HSBC poll revealed that more than 40% of corporate decision makers plan to overhaul their supply chains in 2023. They cited inflation, higher interest rates and weaker global trade as the main economic drivers. Only 11% responded that transforming their supply chain is not a priority in the next year.

However, overcompensating for shortages and delays can result in significant waste in the supply chain. Companies that pivoted to ordering more inventory resulted in overproduction and overstock in some goods as consumer demand is beginning to fall. Materials supplier, Avery Dennison, reported that nearly 8% of surplus stock around the world will end up as waste, and about $163 billion of inventory is thrown out annually.

Additionally, supply chain delays and damage also cause significant loss before products can reach shelves. This includes damaged packaging and products, spoiled food and shorter shelf life.

As for the chemical industry, an August ACC survey showed that U.S. chemical manufacturers continue to experience major supply chain problems and, in some cases, they worsened.

More than 40% of corporate decision makers plan to overhaul their supply chains in 2023. They cited inflation, higher interest rates and weaker global trade as the main economic drivers.

For three consecutive quarters, chemical companies reported that supply chain and freight transportation disruptions harmed their U.S. manufacturing operations. Nearly every company that participated (97%) in the survey reported modifying operations because of supply chain and/or transportation difficulties.

For more information, visit texaschemistry.org or acit.org, or call (512) 646-6400.