Supply chain disruptions seem neverending

by Denys Hobson. The recent heavy rains and flooding in KZN has forced operations across the Durban terminals to be suspended – which while certainly warranted, it means setbacks. To make matters worse, we carry forward the impacts of the Russia and Ukraine conflict and face fresh Covid lockdown disruptions in China. While immediate challenges are being dealt with, the full effect on manufacturing and supply chains is yet to be fully realised.

Coupled with an unsettled local market – this could spell more supply chain issues. While the most recent looting incidents where isolated to Umlazi, had the situation gotten out of hand, we would have found ourselves in even deeper waters.

After five months of growth, retail sales declined in February as spending behaviour normalised following a robust December and January, however the projections for the sector itself seem promising despite further supply chain delays. But, if the last 18 months were not enough to contend with from a trade perspective – another blow has been dealt, delaying full recovery even further.

Based on the past two years, and the data, we can confidently conclude that we are in for an unpredictable couple of months and the hope of global supply chains returning to some sort of stability within 2022 is fading away. We are already seeing an increase in the number of cargo ready dates shifting out due to manufacturing delays, as well as extended air and sea lead times across all trade routes.

Consumer confidence remains low

Despite business confidence being up, consumer confidence is not and the normalisation of spend we have seen recently, is likely to decline as consumers are hit by food price increases, inflation and increased fuel prices over the year. This means that retailers and manufacturers need to plan further ahead to mitigate either sitting with stock they can’t move, or sitting without stock, considering the delays currently experienced as well as the disruptions still to come.

Now more than ever, retailers need to be decisive in their business planning. Larger retailers have the capital and stronger buying power to secure and hold inventory; but smaller retailers may risk stock shortages, cash flow constraints or having to absorb inflated costs to secure stock if they are not forecasting and planning correctly. The value between these factors needs to be weighed carefully – and each business is different.

Sea and air freight remain unpredictable due to external forces, so analysing and implementing the most effective and efficient supply chain solution for your business will be of utmost importance, to ensure adequate stock is on hand at the right time. Businesses and retailers may need to pivot frequently as it’s becoming more and more difficult to plan for the coming months.

Main image credit: Supplied.

Denys Hobson is a logistics and pricing analyst at Investec for Business.

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