Just three years ago, Americans from all over the country rushed to their neighborhood supermarkets to stock up on essential items from canned foods to toilet paper. Even a year after the Covid-19 outbreak, empty shelves and shortages remained a familiar sight for shoppers. Failures in the supply chain were to blame. And for many, the question remains: when will the supply chain normalize again? However, just last month, the White House released a statement about this concern.
Is the Supply Chain Normalizing in 2023?
The White House claims that, yes, supply chains are normalizing. In a recent press release, the Biden-Harris Administration stated that “critical supply chains are significantly more fluid and resilient” compared to before President Biden’s term.
According to the press release, a concrete sign of normalization in the supply chain is the February reading of the New York Fed’s Global Supply Chain Pressure Index. The GSPCI is a “measure of global supply chain pressures that could be used to gauge the importance of supply constraints with respect to economic outcomes.” Price inflation of goods and services in the United States and Europe can affect this index. The reading dropped to -0.26. This is the first time the reading has been negative since August of 2019—which is a good sign.
A second measure that hints at normalization is the decline in Personal Consumption Expenditures (PCE) Price Indexes. This decline indicates that prices for food, energy, and goods, which saw a peak in Q3 2022, are finally starting to normalize. Another index called the Producer Price Index (PPI), which measures “the average change over time in the selling prices received by domestic producers for their output” has become far less volatile. The PPI has shown negative or low growth in the price of goods, like food and shipping. While PPI and PCE are not factors that cause change in supply chain pressures, the trends of the two indexes hint at a continued slow in inflation.
Resilinc’s Supply Chain Disruption Data Supports Stabilization
Data from Resilinc’s latest press release also presents evidence that points towards the normalization of the supply chain. According to data from EventWatchAI (Resilinc’s 24/7 supply chain disruption monitoring platform) the overall number of disruptions is slowing compared to previous years, with a mere 3% increase year-over-year, indicating the supply chain is stabilizing.
EventWatchAI reported 8,197 supply chain disruptions in the first half of 2023. While the number of disruptions overall is stabilizing and even notably decreasing in some historically high-risk areas like factory fires, other emerging financial risk areas experienced substantial year-over-year increases. Bankruptcies surged by 196%, Profit Warnings by 300%, and Corporate Restructuring by 125%. Read the full press release to learn the top 10 disruptions and other exclusive insights: Resilinc Releases List of Top Supply Chain Disruptions and Impacted Industries for the First Half of 2023.
What Contributed to Supply Chain Volatility?
During the pandemic, supply chain bottlenecks were swiftly exposed, along with vulnerabilities in the United States economy and security. Decades of mistakes and neglect of supply chain resilience cracked the whole system.
After the pandemic, as businesses and cities started to open again, demand quickly recovered to the levels before Covid 19, but supply still lagged behind. According to an article from Supply & Demand Chain Executive, shortages in almost all products, from timber to computer chips, popped up. The shortages were further exasperated by delays in shipping and expensive shipping costs. Post-pandemic, consumers faced a recession caused by policies implemented during the pandemic that slowed consumer spending.
The pandemic wasn’t the only cause of supply chain volatility in the US. On top of these circumstances, the statement released by the White House indicated that the Russian-Ukraine war significantly worsened the economic situation and “highlighted the dangers of overreliance on geographically concentrated production and far-flung, fragile supply chains.”
Why is the Supply Chain Stabilizing?
This normalization has been a long time coming. The White House has been targeting supply chain resilience since the beginning of the president’s term. In Biden’s first month in office, he signed Executive Order 14017, known as “America’s Supply Chains.”
Following the executive order, the federal government conducted a “100-day review of the supply chains of four critical products – semiconductors, large capacity batteries, critical minerals and materials, and pharmaceuticals and active pharmaceutical ingredients” to locate weaknesses in the supply chain. With this new information, the White House set in motion plans to strengthen the supply chain and promote agility between all the tiers of production. As of now, 70 of the strategies from the plan have been executed.
Additionally, in the last few years, many corporations have started to focus on supply chain resiliency by putting plans in place to deal with potential supply chain disruptions. These companies have “invested in processes to improve their supply chain agility” according to Sobel Network Shipping—making these businesses more adaptable to disruptions and shifts in demand. Platforms like Resilinc’s Multi-Tier Mapping have helped businesses gain deep visibility into their supply chains.
Through mapping and monitoring supply chains, companies can collaborate faster when disruptions occur, win market share, and turn risk into opportunity. Is your company ready to make the shift toward a more agile and resilient supply chain? To learn more about how Resilinc can help you recover swiftly, reduce freight expedites, and prevent lines down—check out our Multi-Tier Mapping solution.