Global Trade Index

3 Ways the Transportation and Logistics Industry Industry is Facing Mounting Pressure

At the end of 2021, market experts predicted that the supply chain would enter a period of recovery after a long 2 years of struggle throughout the pandemic. All signs pointed to a more optimistic future regarding global trade.

Experts couldn’t have predicted the worsening situations around the world as geopolitical risks began placing greater pressure on enterprises and supply chains than we’d seen in the last few months.

Today, the growth and recovery that supply chains have made over the past few months have been brought to a screeching halt. Enterprises and consumers alike need to understand where this pressure companies are feeling is coming from. Below, we highlight three key factors that are adding up to a tumultuous supply chain environment.

 

1. Recent demonstrations and protests have clogged up entry points

Chances are you’ve heard of the large-scale protests that began in Canada before quickly spreading around the world. But, in the off-chance you haven’t, we’ll give you a quick breakdown:

Truckers and other individuals have been protesting federal vaccination mandates when it comes to battling COVID-19. In Canada, these truckers protested by convoying across the country, gathering supporters along the way until they reached Ontario. The protesters then occupied the city, blocking roadways and shutting down entry points into the United States. While the largest of these protests took place in Canada, many other protests popped up around the globe as other countries struggled with similar demonstrations.

The occupation of these roadways and subsequent blocking of material goods moving from Canada into the United States brought supply chains to a standstill for many enterprises, especially those in the automotive industry. Major manufacturers struggled to get the raw materials needed to produce cars and other goods, meaning demand skyrocketed while supply dropped drastically.

This placed undue strain on supply chains to make ends meet when the automotive industry has already faced a lack of supply over not having the computerized chips and materials they needed to produce new cars.  An already strained industry that was facing a surge in pricing for both new and used vehicles now faced yet another hurdle to easing up their blockades.

 

Bonus Material: Get the inside scoop on the current state of global trade by downloading our Index of Global Trade Health Report.

The recent protests and demonstrations across the globe will undoubtedly have a lasting impact on the T+L industry, but knowing just how long that will last is still unknown. Now that roadways have opened back up and manufacturing is starting to reboot to more normalized levels, consumers can expect the market to shift back in their favor as the year progresses.

 

2. Russian sanctions are impacting the global economy

The Russian invasion of Ukraine spearheaded strong sanctions and trade restrictions from countries worldwide. The United States government, in collaboration with foreign governments and entities, used these sanctions as a means of condemning Russia’s actions while also serving as a means of isolating the country from the global economy.

The sanctions are necessary steps that had to be taken. But, that doesn’t lessen the impact that enterprises and individuals feel across the globe. As more and more businesses and countries are reducing the amount of business and trade they conduct with Russia, the pressures supply chains feel to keep up with consumer demand and shipment times are increasing as well.

Naturally, whenever a country is hit with sanctions and isolated from trade activities, there are sure to be increases in the costs of purchasing goods and services. After all, trade restrictions mean you limit the ability of enterprises (both foreign and domestic) to access resources, raw materials, and other goods that they had come to rely upon in the past.

The sudden stop of the flow of these necessary goods has highlighted just how important it is for supply chains to digitize their processes. Companies need more transparency and visibility into the state of their supply chains. As we’ve talked about countless times before, the solution lies in investing in advanced technology and automation. Digital solutions (automation in particular) offer companies a farther reach and vantage point when it comes to understanding the complex risks affecting global trade.

 

3. Rising oil and gas prices are restricting T+L enterprises

In the United States alone, gas prices have consistently risen. The national average for a gallon of gas currently sits at $4.33 a gallon, up from the price of $2.83 a gallon, which was the national average just a year ago. In some states, a gallon gas price has even jumped over $5 a gallon.

The United States isn’t alone in seeing rising prices at the pump. More than 46 countries have recorded jumps in the cost per gallon, with some countries recording prices higher than $8 a gallon. The impact of these rising gas and oil prices isn’t just affecting the individual consumer — it’s also hurting countless enterprises as they struggle with shipping and transporting goods and services around the world.

 

Experts say that consumers can expect the price of goods and services to increase as companies work to adjust and protect their bottom line from these spikes in prices. But, as we’ve seen from the recovery from the pandemic, supply chains are more resilient now than ever before.

The cost of that pair of wireless headphones or used car might be higher than you’ve experienced in the past or expected. However, as more enterprises implement AI and automation tools, supply chains will see some relief moving forward.

As the world closely watches the actions in Eastern Europe and keeps an eye on the cyclical rises and falls in new COVID cases around the world, you can be sure that Tradeshift will be there to provide insight and forecast future trends.

To stay updated on the latest insights regarding global trade and the state of the supply chain, be sure to check out our blog.

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