The last five years in the global supply chain have been insane.

In 2017, trade conflicts began to cause tensions as new tariffs were introduced, and sourcing shifts began as companies realized they were over leveraged in China. In 2020, a black swan flew in and simultaneously shut down the country - while at the same time fueling unprecedented consumer demand. Now in 2022 we are facing yet another crisis—a plummeting economy. Inflation is at a 40 year high, we have two quarters of declining growth, and major companies are sitting on way too much inventory.

What's different about this third chapter is demand. In 2017, the economy was strong and getting stronger. Consumer confidence, wage growth, and low employment drove spending. In 2020, a massive amount of stimulus, changed lifestyles, and increased down time drove spending to even greater heights.

This time it's different. The economic meltdown is causing prices to rise faster than wages, causing people to pull back on spending by necessity. Consumer confidence is also down for the third month in a row.

So what are my predictions for the global supply chain?

1. The historic shipping patterns are likely to return. Whereas 2021 saw record growth month after month, it is likely that next year January to May will be “slow,”* with an uptick starting in June in advance of the holiday season.
2. Volumes will also return to “normal,” levels meaning (with the exception of September and October) there will likely be enough capacity to meet demand.
3. Procurement and product assortments will shift from high-end luxury items to basic and low cost items.
4. Transportation rates will come down substantially as their customers face shrinking demand (sales) and lower margins.

All of these “predictions” are based on what we experienced in 2008 when the real estate crisis triggered a recession and companies had to get lean and mean in order to weather the storm.

Like any predictions, mine could be way off base. However, history is often a pretty good way to see the future. In this case…I sincerely hope that I am wrong!

*By slow I mean in historic terms where roughly 40% of the volume ships in the first half and 60% in the second. There will likely be a small uptick at the beginning of January due to Chinese New Year which falls on January 2023.