We just completed a year of significant disruptions, including geopolitical conflicts, strike threats, and weather-related disasters that tested supply chains in 2022. This problem added to the pain points for businesses still dealing with the fallout from the COVID-19 pandemic.

COVID-19 lockdowns in China sent businesses searching for alternatives as many suppliers idled production. Russia’s invasion of Ukraine also led to a supply shortage and higher commodity prices, forcing many companies to rethink their sourcing strategies.

Constraints with the U.S. railroads made shippers call for federal intervention, and backlogs began cropping up at East Coast ports as businesses diverted cargo away from the West Coast.

After more than two years of shipping congestion, delivery disruptions, and component shortages, many continue to experience a reliability hangover.

While it’s good to reflect on the disruptions that defined supply chains in 2022, we need to look forward and share views on the year ahead.

Many companies feel battered by the last two years, and there’s an emphasis on the ability to be flexible and where it makes sense to move from a just-in-time to a just-in-case business model. Ongoing disruptions and costs of manufacturing are not coming down, and there’s a shift in where manufacturing will happen, including a shift to different geographies within APAC and outside of China. These include reshoring trends to markets like Mexico.

The market has softened, the demand for tonnage is dissolving, and carriers are offering spot rates (rates valid for 30 days) on more major trade routes from Asia to the U.S. Historically, companies have locked in rates with the carriers for a longer term (1 year or more) to ensure stability in pricing which helps with planning and budgeting.

Global shipping container volumes continue to decrease as the cost-of-living crisis burdens consumers. Inflation has impacted consumer confidence and, therefore, demand. Pricing has essentially returned and/or is in the process of returning to its historic norms. Barring any new global disruptions, the supply chains should be able to unwind fully throughout this year.

Market trends indicate that the first half of the year will be status quo– continued economic softness or weakness, which will manifest itself in supply chains that are working better and pick up in the year's second half.

While no one has a crystal ball, overall, we expect 2023 to be a better year, understanding that the speed at which supply chains become stable will be critical for how quickly inflation is tamed.