Shippers are moving manufacturing closer to home to protect against supply chain disruptions after the extended COVID lockdowns and Ukraine war shocks, according to a report on global trade presented at the World Economic Forum in Davos by global ports group DP World.
Inflation and increasing protectionist policies across trading blocs are also having an impact, said the report.
The "Trade in Transition" study showed 96 percent of companies confirmed they are making changes to their supply chains due to geopolitical events.
The number of companies shifting their manufacturing and suppliers, either to their home markets or nearby, has doubled compared to 2021, added the report commissioned by DP World and led by Economist Impact.
The reasons for changing export and import patterns are varied though, with 27 percent of companies decreasing the length of their supply chains due to geopolitical events such as the war in Ukraine, and 33 percent planning to expand into more stable and transparent markets.
Another 30 percent cited inflationary pressures expected over the next two years and supply shortages, including high energy costs and shipping capacity constraints.
Sultan Ahmed Bin Sulayem, DP World group chairman and chief executive, said that “by bringing production closer to the final customer, firms can reduce the number of touch points involved in the supply chain and build greater resilience into the flow of cargo around the world.”
Real-time visibility and end-to-end supply chain capabilities are all becoming more critical, he added.
Resilience is being prioritized over short-term profitability and just-in-time policies continue to be replaced by just-in-case as companies increase their inventory buffers from an average 8.9 weeks in 2021 to 10.1 weeks in 2022.
Knut Eriksmoen, CEO at Germany-based global supply chain and logistics experts DB Schenker, speaking at the North Atlantic Seafood Forum in Bergen, Norway, last June, said seafood companies should aim to shorten and diversify supply chains as much as possible amid the global container shipping crisis and as the world emerges from the COVID-19 pandemic.
"The reliance on countries or companies is maybe too big," Eriksmoen said.
The executive praised the "relatively good" flexibility of seafood companies' supply chains during the crises but said they remain fragile. There are still challenges ahead such as high transportation and commodity costs.
"Disruptions will not stop with COVID," Eriksmoen said, noting current labor supply and other challenges being faced across many industries.
