I mentioned a few months ago that the emerging constraints on the supply side were likely to be significant and that we expected them to show up in both supply issues and higher prices. Well, two out of three companies reported disruption this year and many companies are not expecting improvements until 2023.
The supply side issues are manifesting across three key areas: certain raw materials and products are simply in short supply; the logistics and shipping capacity continues to cause delays and now the higher input prices and on-costs are beginning to hit the price of goods and services.
28% of the respondents to the survey undertaken by the AI Group (as reported in the AFR) said they were building stock levels, signaling a shift from “just in time” to “just in case” storage. 65% of CEOs found sourcing their usual inputs more difficult in 2021 than in 2020. David Scott of Commercial Freight Logistics suggested “we would be lucky if 30% of vessels arrived on time.”
Despite this, we are seeing remarkable performance by many manufacturers and importers who are finding ways to pivot and get the job done. The free market does some of its best work when things are difficult, and we’ve been surprised to the upside more than once during Covid.
So, what to do?
I think it starts and ends with attitude – the management teams we are seeing who simply refuse to lay down and who find creative ways around their challenges and problems post the best results, both in good times and bad. They say that money follows management and this is why!
Here’s to hoping that next year sees an easing of the supply side and a steadying of cost rises despite the predictions and that after a well-earned break we all return rested and raring to go.
Season’s greetings, stay safe and good luck in 2022