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Supply chain trends for 2022

6 January 2022

Supply chain disruption became a common theme throughout 2020 and 2021, as the pandemic revealed the vulnerabilities in existing supply chain models and approaches. One survey found that almost three quarters of businesses suffered detrimental effects from the pandemic. This has forced a rethink of the way that supply chains are handled, the relationships that exist within them and the expectations that all parties have. 

One factor that has been particularly brutal for many businesses has been the impact of cost pressures, something that we examined in detail in the MBM Omega 2021 End of Year Supply Chain Report. We found that the following factors have been particularly challenging:

  • Freight costs. When container rates peaked in 2021 they were 370% higher than 2020 prices. The cost of shipping and freight has always been a big factor in the delivered cost of products but it’s hard to remember a time when prices suddenly climbed so high as during the pandemic conditions last year. For 2022, it looks like these high levels will remain, thanks to factors such as new surcharges, and there is still the risk of further instability.

 

  • Raw materials. A rise in the cost of pulp is the culprit here – pure pulp is now 60% more expensive than in 2020. This, combined with higher energy costs, has seen prices for paper and cardboard hit record highs.

 

  • The cost of transport. The HGV driver shortage in the UK has been well documented and this, together with the impact of last year’s fuel crisis, has led to an increase in transport costs affecting supply chains. 

 

  • Labour costs. Post-Brexit, there have been shortages in major industries, especially low paid, low skilled sectors like warehousing and manufacturing that are so essential to many supply chains. As the pool of potential workers has shrunk, the number of advertised vacancies within the transport and storage sector has increased by 56% as firms struggle to fill available jobs and labour costs rise.

 

  • Product availability. The previous “just in time” approach to supply chains has proved useless during the pandemic with shortages in power, labour and materials undermining it completely and leaving product availability at very low levels.

MBM Omega has continuously taken steps to try to mitigate the impact of these factors, for example working with suppliers to initiate three distinct stock builds, which cover our fastest selling volume lines, all major brands, and all branded products manufactured in Asia. We have also been focused on staying on top of the latest supply chain trends for 2022, to handle the challenges better and optimise the opportunities, both for our own organisation and our customers. Some of the key trends to note, include:

  • Green supply chain management. It’s no secret that sustainability has become more of a priority for consumers in recent years and many now make buying choices on the basis of brands that align with their own eco values. This has prompted many businesses to switch to a greener model of supply chain management, which is focused on integrating sustainable environmental processes into traditional supply chain stages, from product design to end-of-life management.

 

  • SCaaS (Supply Chain as a Service). As technology evolves, the ability to buy in resources “as a service” continues to grow, including when it comes to the supply chain. This trend makes it possible for any business to contract with one service partner to deliver all, or a proportion of, supply chain requirements, including warehousing, logistics, quality, procurement and production control. The focus for an SCaaS partner is to make each part of the supply chain more efficient, which can have a very positive cumulative impact for any business.
  • A switch from linear to circular economies. The linear supply chain has been the status quo for many years but one of the big trends for 2022 is a shift to a more circular supply chain where manufacturers and sellers reuse and resell discarded items. The ultimate aim of this trend is to help minimise the impact that brands and businesses have on the environment and move towards a much more inclusive economy.  One recent survey found that 70% of brand leaders are intending to invest in a circular economy and circular economy strategies are quickly moving to the top of the agenda. One of the benefits of a circular economy is enabling closer connections between consumers and smaller scale suppliers and growers.

 

  • A more responsive and flexible approach. Agility and flexibility have been huge assets during the pandemic and supply chains have had to be elastic to cope with unpredictable external influences and market changes. Old strategies, such as reducing inventory to the furthest possible degree, may simply no longer work for many businesses. Instead, elasticity is emerging as a supply chain trend for 2022, the idea of being able to increase and decrease capabilities to meet demand in a specific timeframe. This kind of approach enables easy scaling so that demand can be met even when it is very unpredictable – the knock on impact of this is a much more versatile business with streamlined costs, improved service and reduced risks.

As the information from the MBM Omega End of Year Supply Chain Report indicates, supply chains necessarily need to change after the impact of the past two years. These are some of the trends that are going to define what the landscape looks like going forward.