January 24, 2022
Global manufacturers, including almost all AICC Associate and general member companies, are feeling unprecedented pressure as we crawl into a post-pandemic world. Components shortages and surging raw material prices have created a feeding frenzy as we battle global supply chain lockdowns. Furthermore, supply shortages are threatening to cut off economic recovery in many regions of the world, and when coupled with labor and logistics shortages, the challenges appear to be piling up with no end in sight.
Fortunately, demand for corrugated remains strong, and global recovery is beginning to exceed pre-pandemic status. Good news is on the horizon, too, as borders reopen. Manufacturing operations and retailers in Western economies have emerged from lockdowns and are ready to resume imports. In early October, there were almost 500 large container ships waiting to dock outside ports in Asia, Europe, and North America. However, OEMs that have successfully shipped containers to North America are being blocked at sea and delayed by weeks, waiting to be allowed entry. In some instances, these delays are made worse by some ports not having enough labor to unload ships and move products to the next leg of their journey. As a result, ocean freight rates have increased two to five times from 18 months ago, creating an actual bidding war to secure shipping container spots.
OEMs in Asia are certainly feeling the brunt of the downturn more than those in Europe and North America due to COVID-19 restrictions. Seeking goods from regions still in lockdown is virtually impossible. Additionally, while some can export machinery, they are unable to send technicians to perform installs. As a result, several OEMs have had to turn to videoconferencing to remotely walk box plant customers through installs. Others are relying on domestic partners to install equipment on their behalf.
With labor shortages likely to continue, mitigating these is ever more challenging. According to the U.S. Labor Department, just last August, more than 4.3 million workers voluntarily walked off their jobs. And at the time of this writing, strikes were occurring at both Kellogg’s and John Deere by employees feeling they have the upper hand in negotiations and demanding more of their employers.
Many employers have also expressed great difficulty finding qualified and willing applicants to fill the growing void caused by the upended labor market. State officials also have been unsuccessful in attempting to limit additional U.S. federal benefits over the summer, and the current White House administration has done little to mitigate these challenges.
Given all this, we must leverage the hand we have been dealt. It will require a steadfast approach, but the opportunities are there. I recommend building up inventory and creating emergency plans, identifying potential new suppliers, conducting a supply chain vulnerability audit, and partnering with companies that have logistics expertise. Any of these strategies will help you have a successful, healthy, and prosperous 2022!
Greg Jones is executive vice president at SUN Automation Group and is vice Chair of AICC’s Associate board.
