Supply Chain’s Return to Normal Pits Experts Against New Indexes
In supply chain circles battered by more than two years of upheaval, the word “normal” is creeping into the outlook for 2023. In the latest Logistics Managers’ Index , “September’s future predictions hint at normalization and a return to business as usual over the next year.” Analysis from Sea-Intelligence, gauging the amount of bogged-down shipping capacity, shows “all three models suggest we should be back at the ‘normal’ 2% capacity loss baseline by early 2023.” The year-to-date improvements in New York Fed’s Global Supply Chain Pressure Index “suggest that global supply chain pressures are beginning to fall back in line with historical levels.” So is normal just around the corner? If it is, will it really be like before the pandemic? Plenty of economic indexes show improvement in global transportation networks, with more space available on container ships, port congestion easing and ocean freight rates plunging. But that’s only part of the story. The degree of recovery varies widely by industry and region — and many companies are still reporting shortages. (Click here to read the full story.) Spartan Outlook Jason Miller, an associate professor of logistics at Michigan State University, cautions against getting overly confident based on how some of supply-constraint barometers are designed. “A big distinction needs to be made between indexes capturing dynamics associated with international transportation — both containerized waterborne freight and air — versus indexes capturing raw material shortage issues,” he said in an email. “Across all manufacturers, insufficient supply of labor and raw materials have been effectively unchanged since the third quarter of 2021 in terms of severity.” He points to charts like this one to argue that parts and people shortages remain widespread: Source: Jason Miller, Michigan State University/Census Bureau Miller also cites survey responses from the Philly Fed’s monthly survey that show the vast majority of businesses still see the supply chain as a constraint on capacity utilization. In the latest poll, almost 70% reported that the effect was moderate to significant. “It becomes very difficult to make the empirical case that raw material issues are improving,” Miller said. He laid out some reasons to temper the optimism on a LinkedIn post last week. “At the rate things are going, I hope issues will start to substantially ease by summer 2023, but I’m increasingly worried that prediction may be too optimistic,” Miller wrote. Editor’s Note : For Bloomberg terminal users, FreightWaves content is now available at NH FWV
. Charted Territory Up the Creek | A backup of more than 2,000 boats and barges on the Mississippi River is being cleared as two closures along the waterway reopened. Low water levels had halted commercial shipments of commodities, including recently harvested corn and soybeans, in the latest supply chain snarl that came in the middle of the autumn harvest and amid prolonged local drought. By Sunday, the river had reopened at two choke points: near Stack Island, Mississippi, and near Memphis, Tennessee, the US Coast Guard said. (Read more here .) Today’s Must Reads Widening walkout | A strike at South Africa’s port and freight-rail operator that’s curbing mineral exports is set to worsen as more labor unions join the protest. In the UK, the strike-hit Port of Liverpool faces job cuts as declines in container traffic take hold amid a slowdown in global trade, its owner warned . West Coast ports | In the US, talks to broker a deal for 22,000 dockworkers on the West Coast are moving along, despite dragging longer than anticipated, according to Labor Secretary Marty Walsh. Tech tensions | The Biden administration announced new restrictions on China’s access to US semiconductor technology, escalating tensions between the two countries. Meanwhile, signs are piling up that the tech downturn may be deeper and longer than feared. Deal making | US House Ways and Means Chairman Richard Neal said Democrats should prioritize free-trade negotiations with Europe if they’re able to maintain their hold on Congress after the November midterm elections. Train stopping | Rail traffic in northern Germany was halted for several hours on Saturday after cables needed to operate trains safely were severed in what transport minister Volker Wissing called an act of sabotage. Brexit bargaining | The UK and European Union appear to be making inroads on disagreements over Brexit arrangements for Northern Ireland as they restart talks with concessions and declarations of “humility.” Separately, The UK’s bid to join one of Asia’s big trade pacts will take a bit longer , according to the Canadian trade […]
