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Supply Chain Woes: We're Not Out of the Woods Yet

A report from Everstream Analytics cites five ongoing risks, including ocean freight bottlenecks and increased regulation.
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Many analysts predict that supply chain disruption will ease in coming month, as demand for goods slows and players across the supply chain adjust to their challenges.

But plenty of obstacles remain. Everstream Analytics, a supply chain risk analytics firm, has issued a report citing the top five supply chain risks for 2022.

1. Ocean Freight Bottlenecks: “Facing record low-inventory levels, strong consumer demand, and ongoing Covid-19 impacts on logistics and workforces, the global ocean cargo industry will continue to suffer from port congestion and delays in 2022,” Everstream said.

2. The Continuously Changing Workplace: “As the omicron variant of Covid-19 spreads across the world, the risk of infection will force companies to reassess workplace safety and worker compensation to avoid the risk of long-term disruptions from industrial actions or outbreaks of disease,” Everstream said

3. Increased Regulatory Scrutiny: “Sustainability disclosure and reporting requirements for businesses continue to gain momentum amid scrutiny from governments, investors, and customers alike. Further regulations impacting global supply chains will likely be enacted in 2022,” Everstream said.

4. Just-in-Time Inventory Systems: “As the pandemic exposed flaws in just-in-time inventory systems, businesses have been exploring a shift to the just-in-case model, increasing buffer and safety stocks of critical components or best-selling products.”

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5. Global Water Instability: “Two-thirds of the global population will face water shortages by 2025,” Everstream said. “A steady water supply is necessary for production and cooling equipment for pharmaceuticals, tech products, paper, garments, food processing, and other manufacturing industries.”

Meanwhile, with Covid spreading through China anew, big manufacturers are closing factories there again, ports are enduring backlogs and companies are facing worker shortages amid large-scale lockdowns of cities, the Wall Street Journal reports.

That’s raising fear of global economic pain. The Covid spread led Goldman Sachs economists last week to cut their prediction for China’s 2022 GDP growth to 4.3% from 4.8%,

“The risk posed by the omicron variant is that we could take a huge step back in terms of supply-chain bottlenecks,” Frederic Neumann, co-head of Asian Economics Research at HSBC, told the Journal.

“This time, the situation could be even more challenging than last year given China’s increasingly significant role in global supply.”

Several economists told the Journal that China may ratchet up its Covid containment policy, and some even say the government might repeat its countrywide lockdown of April 2020.

Among the companies forced to curtail production are Toyota Motor TM, Volkswagen, Samsung Electronics and Micron Technology MU, according to The Journal.