By May 2022, China-to-US-bound shipping prices had jumped from a pre-pandemic cost of $2,000 to $20,000 per container. By July, inflation had reached levels unseen in four decades. The chip crisis remained intractable, and port backups and bottlenecks continued. And for more than six months, there had been whispers among supply chain leaders that the dark clouds of inflation were gathering on an already stormy horizon. In short, the supply chain forecast was not sunny.
But new signs suggest that things may be less grim than recent headlines would lead many companies to believe. And for those looking for a break in the clouds of more than two years of supply chain disruption, this is welcome news.
At Pivot International, we are a global supply chain and NPD leader that has successfully led clients through a half-century of disruption with alternative sourcing solutions and a fully integrative approach to NPD. Our in-house DFM expertise spans fourteen industries and six markets, making us the proven partner behind a portfolio of internationally award-winning products — including innovations launched at the height of the global pandemic. With 320,000 square feet of manufacturing capability across three continents (including options in the American Midwest), we provide cost-effective solutions for creating products that position our clients for market leadership.
Below are some of the more recent and most positive developments with broad implications for supply chain, NPD, and the broader economy:
The Inflation-Reduction Act Will Spur Modest Economic Improvements
At the time of this writing, the 755-page, $700 billion Inflation Reduction Act was just signed by President Biden. It secures the largest-ever investment in addressing climate change, dedicating roughly $370 billion to reducing harmful emissions and incentivizing green technology. While it’s no magic bullet for inflation, its passing is expected to bring improvements that will positively impact supply chains.
The Chips and Science Act is Set to Cool the Chip Crisis
The Chips and Science Act allocates $76 billion toward helping to increase US semiconductor competitiveness. The legislation includes $39 billion in federal matching grants with chip titans that include Micron, Intel, and Qualcomm. It also provides $11 billion toward R&D and innovation initiatives, $2 billion for semiconductor defense and security measures, and $24 billion in tax credits for new US semiconductor foundries. And while the chip crisis will be more difficult to solve than is generally appreciated, it is a significant step in the right direction.
Global Shipping Rates Have Been Falling
Supply chains — while still insecure — seem to be finding their footing. For example, Flexport, a tech-enabled freight forwarder, has reported reductions as high as 50 percent in shipping costs. After months to years of having their hands tied, supply chain managers are once more in a position to negotiate. This portends the unsticking of many logistical and economic bottlenecks that have plagued companies seeking to launch successful products.
Transit Times are Getting Shorter
Many ports are still dealing with significant backups, but Flexport indicates these issues are becoming increasingly less acute, with trend lines showing an overall reduction of about 35 percent in shipping transit times. Prices stand a good chance of falling even further as idle ships resume service. Although prices are still well above historical averages, they appear to be slowly but steadily coming down. To be sure, falling rates won’t come close to solving systemic supply chain challenges, but they offer a welcome reprieve for businesses and consumers alike.
Demand for Durable Goods is Abating
Durable good consumption is still up 20 percent over February 2020 but considerably down from the 35 percent increase seen in 2021. When considered in the context of falling wheat, gas, and copper prices, the larger picture appears promising, if still uncertain.
Unconventional Solutions for Persistent Problems Exist
For all the positive developments in supply chains, many persistent problems persist that present roadblocks to NPD. These persistent problems demand solutions that lie beyond simple procurement. For example, when parts, components, and raw materials are in short supply or cost-prohibitive (as many still are), the answer often lies in innovative engineering hacks. Provided a company’s NPD partner brings the benefit of in-house DFM (Design For Manufacture), products can often be reconfigured to render supply chain issues a moot point.
At Pivot, we have solved as many as half of supply chain challenges using this approach, which is always undertaken with undeviating fidelity to product requirements, use case, functionality, performance, and quality compliance. And in instances where reengineering isn’t a viable approach, we continue to focus on mitigation strategies and timely procurement to protect our client’s investments.
If your company is preparing to launch a new innovation or unstick a project currently in development, we are the trusted partner you’ve been looking for. Our agile, integrative, collaborative approach and diverse suite of the latest digital technologies make us the go-to partner for companies worldwide. If you’d like to learn more about how we can ease your supply chain challenges and help you launch a successful product, contact us today.