Supply chain – from disruption to inflation and back again

The NRF Supply Chain 360 conference and expo was held in Cleveland June 20-21, 2022. It explored the modes and methods needed to build a stronger, more sustainable supply chain and ensure resiliency in challenging times. Learn more about the conference here.

More than two years after the start of the pandemic, we are still witnessing significant challenges in the supply chain. While we are not seeing as many cargo ships sitting at anchor waiting to dock at West Coast ports as we did at the peak of congestion last year, a number of issues continue to impact the global supply chain and NRF’s members.

Ongoing uncertainty over COVID-19, including the recent lockdowns in Shanghai, continue to lead to delays in shipments of both finished goods for retailers and intermediate goods for U.S. manufacturers. While the Shanghai lockdowns are easing, China’s ongoing “zero-COVID” policy threatens additional lockdowns that could affect the supply of goods. In addition to COVID-19, the war in Ukraine is impacting gas and commodity shipments.

Supply chain challenges are certainly a contributing factor to the significant rise in inflation that has been impacting the U.S. economy. Retailers are facing increasing costs including raw materials, finished goods, transportation, labor and warehouse expenses that have led to increased prices on store shelves for their customers. In response, NRF has been leading both the Save Our Shipments campaign to address supply chain challenges and a new Lower Inflation Now campaign to tackle rising inflation.

One outstanding development that was championed by NRF in both campaigns is enactment of the Ocean Shipping Reform Act. The bill includes common-sense reforms to the Shipping Act that will give the Federal Maritime Commission the additional authority it needs to address unfair business practices — including exorbitant demurrage charges for cargo containers waiting at the ports for truck or rail transportation — that have cost shippers millions of dollars because of issues beyond their control. The House passed the Senate version of the bill last week and it was promptly signed into law by President Biden, who had recently held calls with several retail CEOs to discuss issues addressed by the measure.

Another part of the Lower Inflation Now campaign is removal of damaging tariffs on goods from China that have cost U.S. importers over $140 billion since 2018. NRF recently launched an ad campaign calling on the administration to repeal the tariffs, which have driven up prices for American consumers and cost the average family more than $1,200 a year. NRF continues to help lead efforts through the Americans for Free Trade coalition to highlight the negative impact of the tariffs on U.S. companies, workers and consumers.

As we continue to deal with these issues, one significant challenge is on the horizon. Contract negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association have the entire supply chain concerned with the potential for disruption at West Coast ports. NRF called on the parties in February to begin negotiations well in advance of the July 1 contract expiration. While it is extremely unlikely that a new contract will be agreed to by then, the concern is what happens next.

There is a long history of disruptions from these negotiations, including significant slowdowns during the last negotiations in 2014-2015 and a 10-day lockout in 2002. Both resulted in the administration stepping in to help the parties achieve a final contract. We certainly hope similar disruptions won’t be the case this year. It will be critical for the parties to extend the current contract on July 1, remain at the table, negotiate in good faith and agree to not engage in slowdowns or lockouts.

With all of these issues facing the supply chain, NRF still believes imports will continue to grow this year, according to the most recent Global Port Tracker report. Retailers will adjust as necessary to meet increased consumer demand and expectations. NRF Supply Chain 360 conference provided retailers an important opportunity to discuss these and other issues and work together to develop solutions to create a more resilient supply chain.