Today after completing three years of COVID-19, with ongoing economic and political tension across nations, global supply chains have been put to the test on resilience and reliability.
To deal with shortages, a few manufacturers increased their inventories extensively. Which did ease the challenges of shortages but not completely. High market volatility is still causing shortages and highlighting supply chain discrepancies.
According to Shanton Wilcox, Manufacturing lead at PA Consulting “We’re on a declining rate of shocks relative to the peak we had in 2021 and 2022, but there’ll still be shortages and shocking price increases even during 2023.”
Let us identify raw materials with the highest shortages in 2022 and how they will impact 2023 for manufacturing.
Given recent recession scares, the electronics industry saw a decrease in consumer demand by 30%. This as a result increased the supply of leading-edge and advanced-node semiconductors and improved the availability of largely used legacy chips using these semiconductors, by automotive and industrial companies. Even with supply correction of legacy chips, the automotive industry will still struggle with shortages of other raw materials to fulfill current demand.
Hence, it is predicted that 3 million fewer automobiles are expected to be produced in 2023.
The consumer packaging and construction industry have struggled to secure aluminum, for almost a decade now. In 2022, 20% of the aluminum cost was in its transportation which was highly impacted by the Russian wars. With hindsight on aluminum shortages in upcoming years, big companies such as Coca-Cola, Pepsi, and Molson Coors have signed long-term contracts with their suppliers to ensure a steady supply for their aluminum cans. Still leaving several other companies short on aluminium.
Last year, 90% of European manufacturers were affected by polymer resin price hikes, halting production in more than 50,000 warehouses. Even today, high demand, import taxes, and market volatility made it difficult for several manufacturers to maintain the supply and demand equilibrium.
Inflation prices were the biggest challenge for the construction industry. In 2023, the price is expected to rise by 18%. Due to high lead times and raw material unavailability, constructions were halted while the constructors searched for alternate suppliers.
Ukraine crisis, halted 60% production of sunflower oil, resulting in high prices for consumers. Unavailability of palm oil, used for the production of many consumer goods, highly affected the supply chain. Countries like Turkey and Egypt faced adverse effects and are still struggling to manage their inventories more efficiently.
With price hikes and high demands, manufacturers need to make their supply chains even more resilient to deal with their stockouts. The traditional method of MRP is not enough to deal with the volatility of today’s market which will only increase in the future. Discover in our webinar, how manufacturers and supply chain directors can improve their raw materials replenishments by building a resilient supply chain.