Supply Chain Pressure Eases For 3rd Month in July

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Supply Chain Pressure Eases For 3rd Month in July

Global supply chain pressures are showing signs of easing, according to recent data.

The GSCPI shows that stress on global supply chains has decreased for the third month in July, marking its lowest point since January 2021, according to the New York Fed's Global Supply Chain Pressure Index.

It's definitely stable, Scott Surredin, DHL's supply chain CEO in the Americas, told Yahoo Finance Live that we are actually moving volume very, very well. Inventory levels are really building. Consumer behaviors are shifting back to pre-COVID patterns. Shoppers are returning to stores, people are traveling, and fans are going to concerts and sporting events while spending less on at-home activities.

According to the July ISM Manufacturing Purchasing Managers Index PMI, 52.8% of the manufacturing economy is generally expanding, due to the gradual end of the pandemic-driven supply crunch. As supply chain issues continue to abate, retailers may have to get creative.

It'll be interesting during the peak season, especially with consumer packaging goods and fashion, apparel e-comm, how they get their inventory out, how they're going to discount, how they're going to do promotional strategies, Surredin said.

Supply constraints have caused retail woes to increase in their inventories and forced them to find ways to clear inventory through markdowns or other measures, and pressured them to find ways to clear inventory over the past two years.

While consumer behavior continues to normalize, there's still the issue of record inflation, though it has shown signs of slowing down recently.

People are getting back to basics with inflation and buying consumer packaged goods, buying e-commerce items that are needed, according to Surredin. There are a lot of volume going into those sectors. Port backups - which have been the main cause of supply chain issues - continue to be significant, as shippers skip some major ports to avoid disruptions. The shipping backlog dropped to 10, which was down from the record of 109 on January 9, at the Port of Los Angeles, the busiest in the Western Hemisphere.

There are signs of a slowdown at sea, according to several measures. Ocean container rates from Shanghai to Los Angeles dropped by 32% when compared to the start of the epidemic.

The negotiations for both rail workers and dockworkers and their employers also factor into the equation. Sureddin said that if contract negotiations fall through and workers go on strike, the results would be severe.

He said we've built our inventory even though we cleared a lot of backlog. There is still backlog. There is still a lot of inventory sitting in the ports, in warehouses, trying to get moved. We need to make sure that not only their contract gets done, but we also need to do more automation in areas like that because automation will help us in the future of handling the volume.