Main Supply Chain Issues in 2024: How to Maintain Continuity in New Conditions?

The continuity of the supply chain ensures that goods are delivered on time, in the right condition, and at a reasonable price. Even a small delay or disruption can lead to customer loss, and consequently, a loss of your revenue. Being aware of existing supply chain challenges allows you to anticipate potential obstacles and develop effective strategies to overcome them.

One of the key issues facing supply chains today is the heightened demands of consumers. Global leaders in online sales set high standards of service, raising the bar for customer expectations. In 2024, Amazon plans to expand same-day delivery capabilities. To avoid losing customers, online brands will need to provide a similar level of service.

To offer same-day delivery, it’s important to have a well-organized and streamlined supply chain. Companies need to be able to quickly process orders, pick and pack them, and arrange for their delivery. This requires significant investments in technology, logistics, and personnel.

For small companies with limited resources and infrastructure, meeting these requirements can be challenging. For such brands, it’s important to establish partnerships that help them maintain competitiveness in the rapidly evolving e-commerce landscape.

The year 2021 marked a period of global inflation, reaching its peak levels in the fall of 2022. Despite a decline last year, its level remains anomalously high today. The constant rise in prices for goods, services, and labor has had a significant impact on the cost of inventory storage.

The annual growth in demand for e-commerce only exacerbates the situation. Existing warehouse spaces cannot fully meet this demand, leading to increased rental prices. Just in 2023, rental fees surged by more than 10%.

The volatility of the energy market also significantly impacts the cost of warehouse services. Prices for energy resources peaked with the onset of Russia’s full-scale invasion of Ukraine in February 2022. Prior to this event, Russian gas supplied over 40% of Europe’s needs. The sudden decrease in supplies caused a surge in electricity prices.

Although prices dropped in 2023 and are forecasted to continue falling in 2024, they still remain above pre-crisis levels. The ability of companies to adapt and find effective solutions will be a determining factor in their success in managing storage expenses in the current conditions.

From 2022 to the present day, companies continue to face another supply chain issue – the rise in fuel prices. These additional expenses create a ripple effect throughout the supply chain, impacting not only transportation companies but also manufacturers, distributors, and retail sellers.

The conflict between Russia and Ukraine has been one of the main factors exerting pressure on the rise in fuel prices. It has led to an increase in freight rates as it affected key transit routes for energy resources.

Today, Europe faces the risk of an additional surge in oil product prices due to issues in the Red Sea. Since the EU imposed sanctions against Russia, European countries have been importing oil from Middle Eastern producers through the Suez Canal. However, with the Houthi attacks on merchant vessels in the Red Sea, many companies have started to reroute their logistical pathways around Africa. Several oil companies have already suspended oil transportation through this route. If political tensions escalate further, the price surge could lead to supply chain disruptions of many trading companies.

In addition to the increased freight rates in 2024, there are also prolonged delays due to the blockage of major global shipping lanes. As discussed earlier, the armed conflict in the Red Sea forces trading companies to reroute through the Cape of Good Hope, extending transportation times by an average of two weeks. Considering that over 15% of global shipping passes through the Red Sea, this situation significantly impacts global trade. According to an IMF report, trade through the Suez Canal has already dropped by 50% in the first two months of the current year compared to the previous year.

The increasing number of extreme weather events creates additional supply chain issues for trading companies. In 2023, an anomalous drought lowered the water levels in the Panama Canal to critical levels. The administration had to significantly reduce the number of ships passing through the canal, resulting in serious delays. According to the same IMF report, the volume of trade through the Panama Canal decreased by almost 32% in 2024 compared to the previous year.

Canada also faced delays in the same year due to severe forest fires. Deterioration of air quality and visibility led to supply chain disruptions of local companies. In such cases, businesses have to seek alternative routes, which can result in prolonged delays and increased transportation costs.

Global inflation, rising freight rates, delays due to geopolitical tensions, and unpredictable natural phenomena have led to disruptions in raw material supplies. This creates challenges for both businesses striving to maintain their competitiveness and consumers seeking to purchase goods at affordable prices. Due to supply delays of parts for electric vehicles, Tesla was forced to halt production at its German factory for two weeks. This pause cost the company 100 million euros. To meet consumer demand and avoid losses, businesses must adapt their procurement and inventory management strategies.

Another issue that the global supply chain faced in 2024 is the improper distribution of containers along the Asia-Europe trade route. The majority of freight shipments from China to Europe are carried out by sea transportation. Therefore, the lack of equipment threatens the normal functioning of supply chains.

During the pandemic, when quarantine measures were imposed in China, nobody wanted to return empty containers. Returning them required significant costs. And when trade routes reopened, China experienced a severe shortage of equipment. This, in turn, led to an increase in shipping costs.

Today, the problem has escalated due to the blockade of navigation in the Red Sea. With the increased transit time of shipments, the time for returning empty containers has also increased. This leads to a decrease in the amount of empty equipment in areas of demand.

Labor shortage is one of the major supply chain issues that intensified during the pandemic. According to a study by Descartes Systems Group, 76% of supply chain managers experience a shortage of qualified personnel. In such conditions, companies find it challenging to meet production needs and fulfill customer orders on time.

The shortage is particularly acute in the logistics sector. A survey by the International Road Transport Union (IRU) indicates a global shortage of truck drivers today. This leads to supply chain issues in delivering goods from the port to the warehouse and from the warehouse to the consumer. Supply delays, in turn, lead to customer dissatisfaction and loss of profit.

The growing concern over labor rights, environmental sustainability, and product safety has led to stricter regulation throughout the supply chain. Although the aim of these regulations is to ensure ethical and responsible practices throughout the supply chain, they create additional challenges for companies. In September 2020, the U.S. Congress passed the UFLPA law. It prohibits the import of goods from the Xinjiang region that are produced using forced labor. Companies must conduct due diligence and provide reports to the U.S. government stating that their products were produced without the use of forced labor.

Similarly, the German Supply Chain Due Diligence Act (LkSG) aims to combat forced labor. According to the law, companies are required to conduct due diligence on their suppliers and take measures to prevent human rights violations. Non-compliance with the regulations carries hefty fines. Additionally, apart from financial difficulties, it undermines the company’s reputation, which inevitably leads to a loss of trust from customers and a decrease in sales.

Companies now must conduct more thorough analyses of their suppliers and take measures to eliminate any human rights violations in their supply chain. This requires additional resources, time, and financial investment from companies.

In a dynamic business environment, it’s important to have strategies that not only help address current issues but also safeguard the supply chain from future challenges. Below, we have provided effective strategies to help you build reliable and resilient supply chains.

Natural disasters, political unrest, global pandemics… Any disruptions can significantly impact your company’s ability to meet customer demand. To mitigate the risks of such supply chain issues, it’s important to maintain an additional level of inventory. This strategy will enable you to continue fulfilling customer orders even in conditions of prolonged supply delays.

However, it’s important to find the right balance when implementing this strategy. Excessive inventories can lead to increased costs for their maintenance. Carefully analyze the demand structure, order fulfillment lead times, and supplier reliability. This will help determine the optimal level of additional inventory needed to protect your supply chain from issues.

Suppliers form the backbone of the supply chain. Relying solely on one supplier poses significant risks. In the event of issues with their operations, your entire supply chain is heavily impacted. By diversifying your supplier base, you distribute risks and ensure the availability of alternative sources of supply in case one of them fails to meet their obligations.

Expanding sources of production also enhances flexibility. Different suppliers offer different products and capabilities. This enables your company to quickly adapt to changing market demands or customer preferences. Additionally, having multiple suppliers can serve as leverage during negotiations. You’ll have the opportunity to compare prices and terms offered by different suppliers.

Modern supply chains are often complex and interconnected. Goods come from different places and are transported through various countries. Such complexity makes supply chains vulnerable to disruptions caused by geopolitical tensions, trade disputes, or legislative changes. Having alternative delivery routes allows your company to quickly adjust its logistical operations and ensure uninterrupted movement of goods. This will minimize disruptions in production schedules and maintain customer satisfaction.

Freight forwarders possess knowledge and experience in managing the movement of goods across various modes of transportation. By collaborating with them, you can quickly identify and address supply chain issues. Utilizing modern technologies and establishing a beneficial partnership network, freight forwarders have the capability to track the movement of goods at every stage – from point of origin to final destination.

Such visibility allows your company to identify any potential risks or disruptions in real-time and take preemptive measures to mitigate them. You’ll minimize the likelihood of theft, damage, or loss of goods.

Another advantage of engaging freight forwarders is their expertise in customs clearance and compliance requirements. They are well-versed in the various rules and regulations of different countries and can ensure that all necessary documentation and permits are in place for smooth customs clearance. This will help expedite the movement of goods and reduce the risk of delays or penalties due to non-compliance.

Emphasizing sustainable development is crucial for addressing supply chain issues associated with unstable economies and climates. By implementing sustainable practices, you reduce your dependence on scarce resources and minimize environmental impact. This helps ensure the long-term availability of necessary materials and reduces the risk of supply chain disruptions due to resource shortages or environmental disasters.

Furthermore, focusing on sustainable development will help your company comply with regulatory requirements and stay ahead of changes in environmental and social responsibility laws. This will help you avoid potential fines or restrictions that could disrupt your supply chain.

A third-party logistics provider possesses expertise and resources that may be unavailable within the company itself. 3PL organizations specialize in logistics services and have the experience necessary for effectively managing complex logistics operations. They also have access to a broader network of suppliers and resources. This will help you diversify and strengthen your supply chain.

For instance, Fulfillment-Box has a widespread network of warehouses in strategically important locations worldwide and strong connections with transportation companies. This provides an opportunity to expand your geographic coverage and ensure more flexible and reliable logistics solutions. Even in the event of unforeseen circumstances at one of the warehouses, orders can be redistributed and shipped from another nearby fulfillment center of the company. This will help minimize the impact of unforeseen events on the delivery process and ensure reliability and promptness in order fulfillment.

Additionally, Fulfillment-Box charges based on the actual resources and services used. This will help you avoid unnecessary expenses and won’t strain your company’s budget, even in the event of a sudden increase in logistics service prices or demand for them. This is especially important in volatile market conditions and changing external circumstances.

The ongoing events clearly indicate that today the supply chain is in chaos. Problems arise in various areas, from global political conflicts to extreme weather conditions. Solving these issues requires the development of resilient strategies capable of adapting to change and ensuring flexibility and reliability in the supply chain in the long term.

In the future, we can expect even greater volatility and uncertainty driven by global events, technological innovations, and climate change. However, despite the challenges, upcoming events also present new opportunities for the development and improvement of supply chains. Companies that focus on building robust and flexible supply chains will be better equipped to adapt to unforeseen circumstances and minimize their impact on operations.

Equally important is the involvement of all links in the supply chain in the process of its improvement and risk management. Overcoming current and future supply chain issues requires joint efforts from all market participants.