Normal supply chain conditions may remain out of reach in 2023

KANSAS CITY — The supply chain challenges that plagued the food and beverage industry in 2022 are easing but are not returning to normal. Many hurdles remain, and new ones are emerging — notably China’s abandonment of its zero-COVID policy that has led to a rapid rise in infections and the closing of factories due to a lack of workers. Such challenges make it imperative that industry executives continue to build resiliency and redundancy into their supply chains.Jeff Harmening, chief executive officer of General Mills, Inc., briefed analysts on the situation in December when he explained that his company’s service levels have improved from earlier in 2022 but remained below normal.“… Supply disruptions remain well above historical averages, and we aren’t forecasting a return to pre-pandemic levels of supply disruptions or customer service during this fiscal year,” Mr. Harmening said.The Council of Supply Chain Management Professionals said in its most recent Supply Chain Quarterly that freight volumes for sea, air and trucks are expected to decrease in 2023, and freight rates for all three “are on track to drop from their pandemic high points.”But a survey of supply chain managers conducted by CNBC in mid-December found more than half do not expect supply chains to return to normal until 2024 or after. Another 29% predicted recovery either in or after 2025 or never. The greatest challenges cited in the survey included raw material availability, port congestion, a lack of skilled workers and reduced warehouse space because of rising inventories.There are few ready solutions to any of these challenges. Addressing them will require action from industry and the federal government. Companies like Nestle SA and Conagra Brands, Inc. are streamlining supply chain decision-making and investing in new capabilities such as automation and artificial intelligence to improve efficiencies.While an overhaul of the United States’ immigration policy that could ease the skilled worker shortage is unreachable in today’s political environment, the federal government is trying to contribute. Congress and the Biden administration stepped in to avert a rail strike in early December. Additionally, in the recently passed $1.7 trillion omnibus budget bill were several initiatives intended to address supply chain issues, including funding for the Department of Transportation’s new Multimodal Freight Office, which oversees and coordinates supply chain policy, and the legislation also included funding for the Department of Commerce’s International Trade Administration and Bureau of Economic Analysis to analyze supply chain data, map supply chains and address vulnerabilities.“Since the pandemic, we’ve seen the consumer products industry step up to the plate to address the need for greater resiliency, and now Congress is making similar investments to enhance government expertise and ability to strengthen supply chains,” Tom Madrecki, vice president of supply chain for the Consumer Brands Association, said of the funding package.While helpful, government action will not cure the economy’s supply chain woes overnight. In the meantime, the consumer packaged goods industry must remain adaptable, continuing to find ways to weather an uncertain and unpredictable new normal across the food and beverage supply chain.



Source link