The shops are full. The line of ships off the coast of Long Beach has disappeared. Supply chains have improved, and selling is back to normal.
Supply chains are running much more smoothly than they have been in the past two years. But there are still risks that could disrupt them again.
Examining the so-called “supply chain crisis” can explain what’s still wrong, hint at when it might return to normal – and how to tell.
Cargo is moving
The most dominant factor contributing to backorders and empty shelves was the increased transit time from Asia to the United States by the ocean.
It’s about a two-week trip, but at one point, it took 120 days to transport containers from a warehouse in China to a warehouse in the USA. Over the last couple of years, we’ve gotten into a situation that’s been downright embarrassing for anyone in logistics.
Unforeseen delays this year have prompted retailers to import holiday goods months ahead of schedule just to ensure they’re in stock – a main reason storefronts have been packed for the past few months.
Before the pandemic, the transit time from China to the USA was less than 50 days. At the end of a lean year, that number is about 75 days.
Inflation is slowly disappearing
Even if consumers need to learn how much it costs to ship a 40-foot steel container from Asia to the US West Coast, they’re paying: it’s included in the product’s price. And over the past few years, this price has skyrocketed.
Labor and material costs play a role, but the cost of moving goods – especially on ocean-going ships – has been the most universal and extreme increase for many companies during the pandemic.
It will take time for this drop to affect in-store prices, but it should start to show in a few months.
We will also see our product prices come down as rates come down.
How much inventory is enough?
How many goods are in the country now that could drive prices down even faster as sellers throw considerable discounts to increase their inventory?
Supply chains are out of whack. The inventory-to-sales ratio fell to an all-time low during the pandemic when Americans bought things faster than they imported.
The businesses plan to hold more inventory after the struggles of the past few years. So it will be hard to say when the inventory-to-sales ratio will settle to a new normal, but slightly above 2019 levels is a safe bet, meaning there is still inventory in the country.
What is better to consider now?
Supply chains are made up of millions of individual decisions made by people. These people need to trust that goods will arrive on time, orders will be fulfilled according to plan, and supply chains will be able to get back to normal. And those people still have reason to fear unexpected shocks.
Supply chains have a natural seasonal rhythm. The goods have been coming at a frantic rate over the last few years. Today, they have slowed to a standstill as stores fill and shoppers are wary of the economy.
However, if you need to improve your existing supply chain, PartnerTrade will help you find and calculate a new way to ship your cargo, including all necessary tariffs and services. Get in touch with our managers for complex and expert logistics consultation.