How Events in 2021 Influenced Supply Chains for 2022 and Beyond – Part I

November 7, 2022

This year was a rife with chaos and uncertainty. Some say global supply chains broke. Others say it persevered. Regardless, no one can deny, 2021 was a year of transformation.

Instead of recounting the events that battered global supply chains, our final two blog posts of 2021 will wrap up by shedding light on the transformations that resulted.

We’ll highlight sixteen (16) ways the supply chain landscape has changed. We’ll cover eight (8) of those changes in this blog post. Next week, we’ll highlight the remaining eight (8) changes. You can use these insights to prepare for 2022.

With that in mind, let’s get started with this week’s eight transformations triggered in 2021.

Increase in Partnerships. The relentless tempo of volatility and uncertainty gave rise to partnerships in 2021. Government and industry formed partnerships, as west coast ports experienced unprecedented delays. Also, shippers and logistics service providers partnered just to keep goods moving.
Increase in IT investments. The Delta variant, cyberattacks, and extreme weather wreaked havoc on supply chains. The convergence of those disruptors led businesses to seek solutions from technology. Also, eCommerce exploded as consumers resorted to online shopping during the pandemic. As a result, IT investment soared in E2E solutions, robotics, WMS, and TMS systems.
Increase in sourcing closer to the customer. Near- and on-shoring began gaining steam during the trade wars. That called for a strategic approach to meet rising consumer demand due to eCommerce. Also, rising consumer expectations will sustain this trend, as they demand better, faster, and cheaper service.
Increase in mega ship usage. In 2021, we saw mega ship usage increase. Recall the blockage of the Suez Canal by the Ever Given. That served as a warning to the container shipping industry, but it incident didn’t change the shipment of goods. Instead, a trend in the other direction is underway. More mega ships are being built, and more are in use. However, it’s only a matter of time before this trend reverses. Economies of scale make mega ships attractive. But that may change as capsizing’s, lost cargo, and insurance rates increase.
The rise of longer-term shipping contracts. The cost of shipping reached highs not seen in 30 years. Container and fuel shortages increased shipping prices. To gain more favorable rates, shippers began inking 2-year contracts to stabilize prices. It also enhanced shipping reliability with access to scarce capacity. We should see more long-term shipping contracts in 2022.
Increase in Air Freight Shipping. As ocean shipping prices skyrocketed out of control, shippers turned to air freight. As air freight shipping surged, that put upward pressure on air freight prices. One advantage stands out, however, speed. Shipping strategy changed in 2021 to explore multi-modal solutions to keep cargo flowing. This trend started in response to Covid-19. Beyond 2021, this trend will likely continue because of the rise of eCommerce.
Increase of high-skilled jobs. As companies increased their IT investments, that led to a change in the labor dynamic. Before Covid, warehouses relied heavily on human labor. With the onslaught of the pandemic that led to lockdowns, labor became scarcer. To ease the labor shortage, technology solutions began replacing workers in low-skilled jobs. And that led to a need for higher-skilled workers. As companies adopt more technology solutions, the trend for higher-skilled workers will increase. The workforce will shift from lower- to higher-skilled jobs like data science and analytics.
The rise of eCommerce. We might call this one a mega trend. That’s because eCommerce is spawning other trends. During the pandemic, amid lockdowns, consumers pivoted in great numbers to shopping online. That trend had been growing, but the pandemic accelerated that significantly. eCommerce growth was exponential. Supply chains became stressed from ports to the last mile delivery. Brands were at risk as customer expectations continued to rise. Consumers demanded more for less and in less time—never mind Covid-19. Businesses responded by stepping up to this challenge and will continue to do so in 2022.

Stepping into 2022 and Beyond

These are the first eight ways events in 2021 changed the supply chain landscape. Next week’s post will feature the remaining eight trends. Don’t miss it as we close out 2021.

Overall, 2021 was a year of chaos and uncertainty. But it also proved to be a catalytic year. Businesses embracing these trends will not only survive but will also profit.

At American Global Logistics, we track trends to achieve competitive advantage. It’s how we ensure our customers survive and profit.

Contact us if you’re unsure how to position and prepare your supply chain for success in 2022. We’re standing by to hear from you.

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