2022 Insight data: three trends in global supply chains

As the engine of the global supply chain, the logistics sector has been something of an unsung hero. For much of the 21^st century consumers came to expect a seamless experience by default, where the collection, storage and delivery of goods and materials happened behind the scenes, without fuss.

The turbulence of the past few years – with Covid-19, trade disputes and the war in Ukraine – has put paid to that perception, as Martin Eberle, CFO of Hellmann Worldwide Logistics, shared on our recent webinar. “It has at least given logistics a certain prominence, because people always just expected that things are where they need to be, but now they realise there’s a whole machine behind it that actually brings the goods to the place they are consumed.”

Martin sat down with Demica’s CEO, Matt Wreford, to discuss the latest release of our quarterly Insight data – the sector-by-sector sales data which runs through the Demica Platform – and share views on the state of global trade. With the data now in for the whole of 2022, Martin and Matt focused on three notable trends.

High-performing industries are now showing signs of slowdown

The computers & technology sector, a superstar of the past few years, showed a distinct drop off, with the usual December peak now at its lowest for the past three years – with Demica’s index nearly 30% down on 2021.

This was consistent with what Martin was seeing in terms of freight – according to their data “global air freight in H2 2022 for high-tech has dropped by about 4 – 5%”. Martin also added that they are seeing very high inventory levels in this sector, which has reduced shipments.

Defensive sectors’ supply chains are also under pressure

The congestions in sea freight in 2022 had large implications for many sectors, including the paper packaging sector, forcing a move from sea to air, driving up costs. Demica’s data highlighted the steep fall in volumes through the fourth quarter of 2022, perhaps indicating a dropping off of demand for the sorts of packaging which has been in such high-demand with the boom of e-commerce. Matt flagged this as perhaps a concerning bellwether for overall economic health.

Although inflation has been running in the food production sector for the past few years, 2022 saw saw an acceleration as the impact of the war in Ukraine compounded those effects.

The logistics sector has its own challenges

And, of course, this turbulence has impacted pricing of logistics services. The volatility in freight rates has been “unprecedented” according to Martin – “To say it was extraordinary would be an understatement”. He explained that he had never – in his 20 years in the industry – seen anything like the sort of pricing swings of the last 18 months.

Additionally, the logistics industry has been hit by a shortage of drivers, exacerbating the squeeze on capacity. At Hellmann this group of professionals make up the oldest segment of their workforce, and many are now retiring. This demographic is not being backfilled by new entrants: 1 in every 2 driver vacancies were unfilled in 2022.

“It got worse because a lot of drivers driving through Europe were Ukrainians… you also see a lot of the older drivers going into retirement and it is not such an attractive job for younger people”, explained Martin.

Salaries will have to go up, and talent pools will have to expand happen in order to meet demand: “we will have to attract new talent and maybe we will also have to bring in talent from other countries.”

Martin also saw positives in some of the current market turbulence, highlighting how recent conditions have made many companies pay closer attention to the resilience of their own supply chain, as well as the way they are financed. Smart companies are now tracing their supply chains and more accurately assessing the risks they are exposed to. They are also looking at working capital solutions as ways to support resilience.

If this closer attention means companies emerge from recent conditions with supply chains that are more resilient, and better financed, that will be a boon for long-term economic growth.

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