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After more than two years of managing the impacts of the global pandemic and the supply chain disruptions that it has created, organizations across most industries are looking for signs of relief and hoping it will come sooner than later. And while order lead times remain extended for some products and the labor market hasn’t loosened up much, there are some signs that the supply chain crunch may be easing somewhat.
Here are five indicators that a more “normal” operating environment could be coming into focus for procurement professionals and supply chain managers:
- The GSCPI fell for the third straight month in July. The New York Federal Reserve’s Global Supply Chain Pressure Index (GSCPI) measures global supply chain pressures that could be used to gauge the importance of supply constraints with respect to economic outcomes. The Fed says that changes in the GSCPI are associated with goods and producer price inflation in the United States and Europe, both during the pandemic period and dating back to 1997. The index fell for the third straight month in July, hitting its lowest point since January 2021, according to Axios. At 1.84 points above typical levels—down from an all-time high of 4.32 in December—the GSCPI’s downward movement suggests that products are slowly moving more freely through the economy.
- Port congestion appears to be less of an issue right now. Granted, we’re in the middle of peak shipping season and the holidays are right around the corner, but at least for now it appears that the massive levels of port congestion that made headlines just a few months ago have been minimized. According to CNBC, the queue of vessels waiting to unload goods at the Port of Los Angeles—North America’s busiest container port—has fallen 80% since the start of the year as global container prices continue to slide, pointing to more easing in supply chain disruptions. It says the backlog of vessels waiting outside Los Angeles has fallen from a record high of 109 to 20 and the port moved 876,611 twenty-foot equivalent units (TEUs) in June, its best record in over 100 years.
- Lower consumer demand is giving companies a breather. This one is a double-edged sword, of course, since lower consumer demand could pave the way for a potential economic downturn at some point. For now, however, the lower demand is allowing companies to “catch up” and work to get their supply chains back in order after a whirlwind 2+ years of high demand, low labor availability and ongoing disruptions. Citing Flexport’s Post-Covid spending monitor, Bloomberg said the indicator’s latest reading shows “consumer preferences slightly away from goods in May,” with similar results expected through Sept. 30.
- Ocean freight rates are coming down from their record highs. In another indicator of emerging supply slack after two years of tightness, Bloomberg says ocean freight rates have continued their decline from record highs. “And the fact that it’s happening during what’s usually peak season for global shipping leads some observers to conclude that a market that lacked any excess capacity just a few months ago is rapidly swinging back in the other direction,” it adds, noting that ocean container shipping rates remain “well above” pre-pandemic levels. However, “their trajectory looks increasingly like a slide still searching for a bottom amid uncertainty about consumer spending,” the publication adds.
The semiconductor shortage may be beginning to wind down. One maker of computer peripherals and software is beginning to see the early signs of relief on the semiconductor front, where Logitech’s CEO expects the shortages to wind down by the end of its fiscal financial year (March 31, 2023). “We are not over it, but the symptoms are getting milder,” Logitech CEO Bracken Darrell told Reuters. “We will be free and clear in the third quarter, or in the worst case, the fourth quarter,” he said, referring to Logitech’s two reporting periods that end in Dec. 31, 2022, and March 31, 2023, respectively.
