While the pandemic may seem like a distant memory, its lingering effects continue to ripple through global supply chains. Like the aftermath of a powerful tsunami, the surface may appear calm, but underlying currents still influence the course of global commerce.
A new joint report from the Association for Supply Chain Management (ASCM) and KPMG serves as a deep-sea probe, revealing the true state and future trajectory of supply chains in this post-crisis period.
The Stability Index: A Supply Chain Health Check
The "Supply Chain Stability Index" functions as a comprehensive diagnostic tool, examining three critical dimensions: freight costs, labor markets, and inventory levels. By quantifying fluctuations in these metrics, the index assesses overall stability, with 1 representing normal conditions and higher numbers indicating greater uncertainty.
The report shows the index stood at approximately 1.7 in Q1 2023—down slightly from 1.88 in Q4 2022 but still significantly above pre-pandemic levels. This suggests that while recovery is underway, true stability remains elusive.
"Current supply chain instability is nearly double pre-pandemic levels,"
noted Douglas Kent, ASCM's Executive Vice President of Strategy and Alliances. "This isn't just about numbers—it reflects growing challenges and uncertainties across the system."Freight Costs: Surface Calm Masks Strategic Shifts
Ocean freight rates from Asia to the U.S. have dropped 27%, while air cargo rates plummeted 50%—returning roughly to pre-pandemic levels. However, this apparent normalization conceals a significant strategic shift: the rise of "China+1" diversification strategies.
Businesses are increasingly spreading operations across multiple countries to reduce dependence on China. The data reveals Mexico now accounts for 15% more U.S. imports than China, with Canada exceeding China by 5%. This geographic rebalancing has altered transport patterns, with U.S. outbound shipments to Europe and Asia declining 26% and 6% respectively.
Kent views reduced China dependence as positive but cautions about potential labor market disruptions from this transition.
Labor Markets: Divergent Trends in Manufacturing and Logistics
Transportation and distribution sectors show unstable job vacancies, with fluctuations double pre-pandemic levels. While unemployment in this sector rose from 3.7% in October 2022 to 5%, manufacturing tells a different story.
Manufacturing job openings have fallen 30% since Q2 2022, despite employment remaining 42% above pre-pandemic levels. Government initiatives like the CHIPS Act aim to reshore semiconductor production, but Kent questions workforce readiness: "Do we have the workers to support this domestic manufacturing expansion?"
Inventory Management: The Great Rebalancing
After pandemic-era stockpiling, businesses now struggle with excess inventory. Wholesale inventory-to-sales ratios approach pre-pandemic norms, while retail ratios follow suit. Manufacturers report 8% growth in unfilled orders, signaling production normalization.
Retailers face particular challenges, canceling orders and delaying shipments to rebalance stocks—often resulting in cost-cutting measures like layoffs and store closures.
Outlook: Continued Turbulence Demands Resilience
Kent anticipates ongoing instability, noting how quickly disruptions can emerge from port closures, natural disasters, or geopolitical events. "Predictability remains low," he observes, citing cybersecurity threats and climate-related disruptions as growing concerns.
As supply chains navigate this prolonged recovery, adaptability and resilience emerge as critical competitive advantages in an era where change remains the only constant.