Global Supply Chain Management Updates

As we ease into the long July 4th weekend, here are some management updates to consider.

Bullish forecast. Joel Prakken, co-head U.S. economics for IHS Markit, says the post-pandemic rebound in prices, exacerbated in sectors where demand is recovering faster than atrophied supply chains can accommodate, has proved stronger than expected. “In response, we have raised our forecasts of inflation for 2021 and 2022, from 2.6% and 1.7%, respectively, to 3.3% and 2.1%. However, as supply expands, we expect inflation in prices for core personal consumption expenditures to remain near 2% after 2021,” he says. According to Prakken, recent strong demand has combined with sharply falling inventories, which will add to growth as firms replenish inventories during the second half of the year. “We expect GDP to surpass its previous peak in the second quarter of this year and the output gap to be eliminated in 2022. “The potential economic impact depends on the final scope of the bill, and importantly, how much of the total is new spending,” he concludes.

Resilient assets. Cushman & Wakefield, a leading global real estate services firm, released its “2021 Global Logistics Outlook” last month. The report analyzes key drivers affecting growth, global leasing dynamics and provides a snapshot for the sector. “The unprecedented disruption caused by COVID-19 pandemic and changing consumer behaviors has reshaped the future of the logistics industry by exposing global supply chain vulnerabilities and accelerating technological advances. As a result, a variety of global trends have emerged, propelling the sector forward in new ways,” said Cushman & Wakefield’s Jason Tolliver, Investor Lead, Logistics & Industrial Services, Americas. The North American industrial market experienced growth despite the COVID-19 pandemic wreaking havoc across the globe, as well as more local disruptions including hurricanes and wildfires. It has proven once again to be one of the most resilient asset types.

Reshoring revisited. Thomas, a leader in product sourcing, supplier selection, and marketing solutions for industry, released its “2021 State of North American Manufacturing Annual Report” last month, sharing insights from its latest survey canvassing the North American manufacturing and industrial sectors. While the report reveals multiple shifts in domestic sourcing trends and supply chain demands, the key takeaway is the industry’s growing prioritization of reshoring in the aftermath of COVID-19 and the associated benefits of this shift for the U.S. economy. According to the survey, 83% of North American manufacturers are likely or extremely likely to reshore (up from 54% in March 2020). If these manufacturers with plans to reshore bring on just one single-contract domestic supplier, the shift would drive as much as $443 billion in U.S. economic value. “We are witnessing the wholesale reexamination of supply chain relationships, which will realign global manufacturing for decades to come,” said Tony Uphoff, Thomas president & CEO.

Technology vision. Eager to avoid a repeat of the challenges of 2020, logistics managers are looking to technology to build greater relevance to customers, stronger resilience to disruptions, and enhanced responsibility to society and the planet. New findings from Accenture’s “Technology Vision 2021,” based on responses from more than 600 supply chain leaders, demonstrate that 81% of executives said the pandemic has been their organization’s largest stress test. In fact, the same number agree they’re facing technological changes at unprecedented speed and scale. The report explores key trends and priorities for supply chain executives, including harnessing the Power of Digital Twins with mirror world simulations, providing enterprises the freedom to explore new ideas and ask limitless “what-if” questions in a risk-free, digital environment. It also notes that democratization is breaking down traditional divisions between the technology and business sides of the organization.

Retail rebound. The Census Bureau’s Advance Monthly Sales for Retail and Food Services show a slow but steady return to normalcy last month, says Kearney analyst Michael Brown. “Dramatic increase in apparel and food service sales vs. last year foreshadow what is yet to come this summer as mask mandates are lifted and the country starts to reopen,” he says. Brown also noted that vacations, back to work and back to school will fuel demand and sales in apparel and general merchandise. However growing supply chain challenges throughout the country and conservative planning by retailers could limit how much of that demand can be satisfied. “Retailers need to review forecasts and inventory commitments for Holiday 2021 which could be a blockbuster,” he concluded. “Waiting to see what happens this summer will be too late for retailers to react,” he concludes.

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