Supply Chains Under Pressure in 2023

Although the pandemic is mostly behind us, issues still linger when it comes to supply chains. That, along with huge increases in energy prices, large fluctuations in the supply and demand for transport capacities, delays at ports, double-digit inflation for numerous countries, the war in Ukraine, the push to reduce CO2 emissions, and the West’s dependence on imports are all adding pressure to global supply chains.

Amid all of these challenges, commercial and industrial companies are analyzing their supply chains searching for ways to optimize them and find alternatives. One possible alternative is to go back to warehousing to gain greater stability in the supply of goods of all kinds; however, the economy has no short-term alternative to international production and trade.

Just-in-time delivery is a strategy followed for a very long time; however, it can no longer be relied upon in many sectors. High-volume consigners have the advantage of market power to exert pressure on shipowners, port terminals, and transport companies to meet just-in-time delivery schedules. In addition to delays in deliveries worldwide, the huge increases in freight rates caused problems for shippers last year. For 2023, consigners hope that freight costs will gradually taper down toward pre-pandemic levels.

Rolf Habben Jansen, CEO of Hapag Lloyd, pointed out at an online press event that the significant increase in fuel prices will mean that shipping lines will have to reckon with freight rates around 20% to 30% higher than two to three years ago. He expects that shipowners will face difficulties in long-term planning in general and will need to rely more on quarterly adjustments in services and rates.

Major seaports, such as Rotterdam, Europe’s largest port, will respond to increasing costs with moderate price hikes of around 2.5% to 3%, according to Siemons Boudewijn, COO of Port of Rotterdam Authority. Other ports are also expected to implement price increases for 2023.

Ultimately, global logistics with its worldwide supply chains will continue to be caught between politics, economics, and ecology in the future. The great concern about the possible escalation of the war in Ukraine and of the Taiwan conflict means that companies are already starting to look for alternatives which will also change global supply chains. Whether there will be more regionalization, or nearshoring, remains to be seen.