[Infographic] How 2022 holiday season will challenge your supply chain
When preparing for the holiday season, planning ahead on the procurement side is crucial. But this year this can be especially difficult given the unique challenges that the 2022 Holiday season brings to the supply chains. The present and forecasted recession in North American countries (and globally), the Russia/Ukraine conflict as well as inflation, and increasing interest rates are leading to lower access to capital, an increment cost of goods, and supply chain disruptions that get magnified during the holiday season.
In this post, we analyze the specific challenges that the North American supply chain will face this holiday season and provide some recommendations to navigate them with success.
Common problems faced during the holiday season
Months ahead even the holiday season starts, procurement departments get ready to face the common holiday season challenges, such as early season shoppers, weather-related problems, and consumer demand shifts. They try their best to predict customers’ demands, maintain proper suppliers and vendor management and maintain inventory levels. But this year, the holiday season brings new challenges.
Unique 2022 holiday season challenges
Recession in North America: The US saw negative growth in the first (-1.6%) and second (-0.6%) quarters of 2022. On the third one, the estimated growth is 0.3%. In Canada, economists are warning that the country is heading toward a mild recession. Mexico is not in a recession this year, but it is expected that the Mexican economy will not grow in 2023 amid the US deceleration.
Russia/Ukraine conflict: The conflict has caused an increase in oil, natural gas, as well as metal, and agricultural commodities. Russia is a major exporter of some of the world’s essential products. As Deloitte points out, “Russia is a significant source of many of the 35 critical minerals that the US Department of the Interior (DOI) deems vital to the nation’s economic and national security interests.” For example, they export palladium, which is a critical component of catalytic converters for cars.
Inflation and interest rates: Central banks around the world continue to tighten monetary policy. Canada, the US, and Mexico have raised interest rates to bring inflation down.
Two Main Impacts of 2022 Holiday season on North American Supply Chains
There are several Supply chain disruptions in 2022 and all are interconnected, below we mention the main
The rising cost of living makes it difficult to forecast consumers’ demands
Usually, consumers demand increases during Holiday Season, but 2022 may be a bit different. All economic factors mentioned above (inflation, interest rates, recession) in conjunction with the consumer behavior shifts caused by the pandemic make it especially difficult to estimate the amount and type of products that people will be willing to buy this holiday season.
Low access to capital, high prices, and inability to maintain inventory levels
Inflation and increment in interest rates have a direct impact on inventory levels. Businesses have less finance available and experience a higher cost of products. Borrowing becomes more expensive and can lead to debt-led growth.
Most common strategies used to address Supply Chain Challenges
In the Study “Canadian Survey on Business Conditions“ conducted by Statistics Canada in 2022, businesses listened the following points were mentioned as the most common strategies used to address Supply Chain Challenges:
- Searching for alternate sources of supply (64.55%)
- Increasing communications with suppliers or wholesalers (58.3%)
- Monitoring shortages, delays, or disruptions for critical inputs, products or supplies (57.3%).
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