At the NRF Supply Chain 360 conference and expo, attendees explored the modes and methods needed to build a stronger, more sustainable supply chain and ensure resiliency in challenging times. Learn more about the conference, held June 20-21, 2022, in Cleveland, here.
As we entered 2022, one of the big questions we faced was when the supply chain would “return to normal.” Now that we are a few months into the new year, it remains a critical question for retailers across the country. Unfortunately, we still don’t have a definitive answer. Congestion at West Coast ports that drew headlines much of the past year is easing, but we are now witnessing congestion at some key East Coast ports. Several issues continue to impact the supply chain, with other challenges expected later this year.
While the omicron variant has largely come and gone in the United States and many COVID-19 restrictions have been lifted around the country, there are still significant issues in other nations. China has just announced a new round of lockdowns because of a new outbreak and its “zero COVID” policy is a challenge as cities and facilities are forced to shut down. This is impacting key manufacturing and shipping hubs, including Shanghai and Shenzhen, which are critical for many retailers.
The overall uncertainty over COVID-19 remains a major concern for retailers and their partners. Consumer demand will continue to be strong in 2022 and will put additional pressure on the supply chain as retailers try to keep up. According to NRF’s Monthly Economic Report, inflation is on everyone’s mind and “has been making consumers and businesses miserable” as prices have picked up dramatically over the past year. Despite that, NRF is forecasting that retail sales will grow between 6 percent and 8 percent in 2022 — meaning more goods to move through the supply chain.
Adding to inflation concerns is the war in Ukraine and economic sanctions against Russia by the United States and other nations. Increased sanctions continue to hammer the Russian economy, with many U.S. companies pulling their operations and investments out of the country. Some of these actions are having both direct and indirect impacts on the supply chain.
Cutting off Russian oil is leading to increased fuel costs for both businesses and consumers. Major ocean carriers have suspended bookings in Russia, which impacts not only shipments to and from the country but also those just passing through. While there are limited retail imports from Ukraine, other countries are being impacted because transportation resources are being used for humanitarian efforts.
If COVID-19 and a war are not enough, retailers are already planning for potential additional disruptions due to labor negotiations on a new West Coast ports labor contract. The current contract between the International Longshore and Warehouse Union and the Pacific Maritime Association is set to expire on July 1. NRF recently wrote to both parties urging them to begin negotiations early in order to reach a contract agreement that would ensure continued cargo growth for the region.
The letter noted that any additional disruptions at the ports would add more costly delays to our members’ supply chains and likely add to inflation concerns that further threaten the economic recovery. NRF has heard from many members that are already implementing mitigation strategies to address potential disruptions related to the negotiations.
While challenges continue, the administration and Congress continue to look at options. President Biden called out ocean carriers during his State of the Union address and noted that the administration is looking at solutions for leveling the playing field in ocean shipping. That includes a renewed call for Congress to pass the Ocean Shipping Reform Act as well as removing the antitrust immunity provided for ocean carriers under the Shipping Act. NRF supports both initiatives. OSRA has already passed the House and is awaiting Senate passage. In addition, NRF continues to call for the creation of a National Freight Data Portal to help supply chain stakeholders improve data sharing, which is essential for resiliency.
While pressure remains on the supply chain, retailers continue to respond and work closely with their partners to address these challenges.
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