Overcoming Global Supply Chain Issues in Wire and Cable Industry 2023
Global supply chain issues have been heavily affecting the wire and cable industry since the start of Covid-19. In this article, we cover all current global supply chain challenges as of 2023 and ways to address them.
International Factors Affecting Supply Chain Issues Explained
2022 Shanghai COVID-19 Lockdowns
In 2022, the Covid-19 challenge to the global supply chain came back in the shape of a mass lockdown in the city of Shanghai that lasted from February to March. The strict lockdown caused the factories and warehouses to shut down. This caused yet another disruption of the global supply chain due to China being responsible for 10-12 percent of global trade.
For the wire and cable industry, China is especially important for the supply chain as it is a top world supplier of copper, aluminum, and steel and the second largest manufacturer of wire and cable. The issues have since stabilized after the lockdown was lifted in August 2022, but its impact lasted slightly longer.
It is safe to say that any major events that impact the industry in China have an utmost impact on the global supply chain, and the impact of Chinese internal political and economic processes on the world's economy is staggering. Due to political tensions surrounding Taiwan, there are more risks to the international supply chain.
Rising metal prices and the Russian invasion of Ukraine
Metal prices skyrocketed in February- April 2022 in the aftermath of the beginning of the large-scale Russian war in Ukraine. At that point, the prices were already high due to the long-term consequences of the Covid-19 pandemic.
As a result, copper reached its all-time high price of 5.02 in March of 2022 (the price has since stabilized and dropped to 4 -4.1). Aluminum also reached its peak price of 3,8 on 28/02/2022, right after the start of the invasion. Other metals that saw price hikes include nickel, cobalt, and palladium. All these metals are essential components of the industrial products important for the wire and cable business, including alloys and stainless steel.
Ukraine and Russia are important for the metal market, with Ukraine being a noticeable supplier of iron and steel and Russia being the second largest supplier of aluminum after China at 17%, in addition to having its share of the world's steel supplier market. On top of that, both Russia and Ukraine are wire manufacturers.
Ukrainian industry related to wire and cable production is forced to shut down because most of the industrial premises are located in the war zone or on the territories occupied by Russia. Russian industry is, in turn, affected by industrial sanctions enacted by the EU, the USA, and other countries. Due to both countries' significance in the global supply chain, the ongoing war will continue to affect the supply chain, likely even for some time after it is over, as sanctions will not be lifted at once, and Ukraine's industry will take a lot of time to restore.
Natural disasters have an impact on raw materials and travel routes
In 2022, there were 250 extreme weather events, and these numbers are not likely to reduce anytime soon due to the impact of climate change.
Domestic Factors Affecting Supply Chain Issues Explained
United States experiences labor shortage
According to the Economist, there are 3 million fewer workers in the country than before the Covid-19 pandemic in March 2020, a 2 percent overall decrease.
Transportation and logistics costs are on a rise
Ever since the beginning of the pandemic, there has been an increase in truck freight costs and airfreight prices. New logistic challenges arise when businesses are attempting to implement new supply chain design.
The prices have been rising since the pandemic due to insufficient shipping capacity and a shortage of containers in the ports worldwide. Frequently occurring port congestions are also an issue.
Expectations of recession
The recession, which was previously expected to hit earlier this year, is now expected to arrive in late 2023- early 2024. As a result, weaker domestic economy and weaker global growth, along with slower export sales may cause a problem.
Wire and Cable Supply Chain
How Long Will Supply Issues Last?
Are supply chain issues getting better? The answer is yes and no. Why raw materials prices have stabilized since spring-summer 2022, and the global inflation and inflation in the United States have slowed down compared to the last year, the supply chain is nowhere near pre-pandemic levels. Ultimately, prices are still on the road to increasing from a global perspective, even though the lead times are improving compared to last year.
Current market is unpredictable, and new global factors capable of disrupting the supply chain may arise at any moment. Therefore, the supply chain has to adapt to facing new challenges. Naturally, supply chains will continue to diversify to face upcoming problems with more ease.
Strategies to Overcome Supply Chain Issues For Businesses
Fixing supply chain issues is not an easy task, but every cable supplier, distributor, and manufacturer can take action to minimize the impact of the supply chain issues on their business.
- Companies should improve sourcing and logistics strategies
- Companies should adjust supply strategies toward planning way in advance
- Companies that have strong relationships with suppliers have an advantage
- Having partners with global facilities can help reduce transportation costs.
- Diversifying suppliers helps businesses not to depend on a limited number of suppliers
- Companies should have a material resource planning (MRP) forecast for at least six months ahead and have a vendor-managed inventory (VMI) program.
- Having product substitutions for diversification is also important
- Manufacturers that respond to issues by adding capacity are doing better than others
