As the global economy is buffeted by supply chain challenges ranging from the rising costs of commodities and transport to the availability of raw materials, economists at the Federal Reserve have taken action by creating a new tool for analysis. The Global Supply Chain Pressure Index draws upon 25 years of data and a diversity of metrics to map, measure, and manage the adverse impacts sustained by the global supply chain and economy.
Its findings have been extensive and varied, but a unifying theme is clear: during the pandemic, supply chain pressures achieved a meteoric rise — a rise far exceeding projected trend lines which reached its presumable zenith in October of last year. And while the details of this rise across sectors are extensive, it behooves supply chain professionals, policymakers, and business leaders to be aware of the following key findings.
Here Be Dragons
Supply chain impacts sustained in the wake of the 2008 financial crisis are a comparable picnic to those we’ve been experiencing. As Chris Rogers, principal supply-chain economist at freight forwarder Flexport Inc., explained, “We’re firmly in uncharted territory in terms of how far rates have gone up.”
At Pivot International, we’ve been a trusted partner for buffering clients from supply chain, economic, and geopolitical risk for nearly fifty years. In both the best and most challenging of times, we provide advanced NPD experience, industry-leading DFM, and comprehensive supply chain solutions that help clients deliver profitable products to market. Even in a situation as seemingly intractable as the one in which companies currently find themselves, we are often able to help them overcome supply chain challenges. How? By deploying the power of industry-leading DFM expertise to devise innovative engineering hacks that move your NPD forward or get it back on track.
International Shipping Costs Have Broken the Sound Barrier
The cost of transporting ocean-borne goods from China to the U.S. West Coast soared more than 72 percentage points between spring 2020 and autumn 2021. This represents a surge surpassing the long-term trend projections for container shipping rates of more than 50%. To put things in perspective, amid the rubble of the post-financial-crisis recession, we saw a 41 percentage-point swing when shipping prices rose 14% above the long-term trend. To drive the point home even further, the report found that the global going price of a 40-foot container made a superhuman leap from $1,400 in early 2020 to more than $11,000 last September.
This latest data underscores the vital importance of domestic manufacturing and the infusion of capital and political will undergirding its growing resurgence. At Pivot, although we offer extensive company-owned manufacturing facilities in Europe and Southeast Asia, our three manufacturing facilities across the American Midwest are playing an increasingly critical role in our ability to deliver cost-competitive alternatives to China-based production.
There’s Good and Bad News to the Current Crisis
According to Chris Rogers, the primary driver for spiraling rates is the intense consumer demand for goods. That’s the positive part. The negative? This demand continues to put transportation networks underwater. And yet, the report found that supply and demand forces are responsible for only a little over half of the rate hikes since mid-2020, which leaves a lot left over to be accounted for. Perhaps unsurprisingly, port congestion and labor and trucking shortages made up the difference to result in a perfect storm of pressure that continues to strain the links in the global supply chain as never before.
For companies that can find successful strategies for mitigating supply chain disruption, the market opportunity has never been greater. At Pivot, we’ve built our reputation on our track record of helping you seize market opportunity by delivering alternative supply chain solutions that are too often overlooked.
If you’re gearing up to launch a new innovation or simply to unstick your existing NPD, we are the trusted partner you’ve been looking for. Our client-centric, highly collaborative approach is the driving force behind some of the world’s most innovative and internationally award-winning products. If you’d like to learn more about how we can help your business scale in challenging times, contact us today.
We look forward to working with you!