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New Disruptions, Geopolitics Hang Over 2024 Supply Chains

Companies that assembled new supply chain strategies in the wake of the Covid-19 pandemic are having to put those plans into practice far faster than they may have thought possible.

Global supply chains are entering 2024 roiled by disruptions at two of the world’s crucial trade corridors—the Panama Canal and the Suez Canal—even as geopolitical tensions appear set to take a more prominent role in sourcing and distribution. That could potentially force countries and companies to redraw trade maps that have been built over decades.

At the same time, startups and longstanding businesses are establishing the new supply chains behind clean energy, including the operations backing an automotive sector that is a foundation of manufacturing logistics networks.

All of this is buffeting supply chains from semiconductors to consumer goods, pressing companies that sought to bring greater resilience and flexibility into their operations to act in a fast-changing manufacturing and shipping environment.

The sudden shocks and shifts will pose a challenge this year to ocean carriers, truckers and other freight and logistics companies that will have to divert resources according to diversions in cargo flows and swings in demand.

Wars in Ukraine and in the Middle East are threatening flows of grain, oil and consumer goods. Climate change and mass migration are disrupting trade lanes from the Panama Canal to the U.S.-Mexico border. Growing geopolitical tensions are making international supply chains ever more complex.

Still, many companies, including big retailers, can point to dramatic success over the past year in clearing out the big stockpiles of inventory that they built up during the pandemic to cope with shipping disruptions and rapidly changing consumer buying patterns.

The broad measure of inventories to sales ratio across U.S. retailers has stood at 1.30 from May 2023 through October, suggesting merchants have achieved some stability after the roller-coaster pandemic years.

With U.S. holiday sales up 3.1% this season from the previous year, many retailers reported leaner inventories that reflected restraint rather than a rush to restock.

“As we built our plans for this holiday season, we maintained our cautious inventory positioning and markdown sense of categories,” Target Chief Executive Brian Cornell said on an earnings call Nov. 15. “This provides our team the necessary flexibility to quickly adjust to volatile trends, something that has served us well all year.

“What is driving our top line sales is our ability to keep our inventory fresh and clean,” Lauren Hobart, CEO of

, said on a call with investors Nov. 21. “It’s important to bring it in when it’s hot.”

The company’s comparable-store sales in its last quarter rose 1.7% while inventory was down 2%.

Many retailers and manufacturers during the pandemic flipped from a just-in-time strategy of receiving clothes, electronics and furniture as it is needed to a “just-in-case” strategy of hoarding inventory to avoid losing sales.

Now that most inventories are back to prepandemic levels, importers are pulling in fresh orders. But analysts at S&P Market Intelligence note high interest rates make it more expensive to carry large inventories and could push some companies back toward a ”just in time” strategy, even as supply risks grow.

For logistics providers, the flexibility of their shipping customers means they have to respond with similarly nimble operations. “I don’t think we’re back to ‘just in time,’ but I think ‘just in case’ has been redefined at a lower level,” said Sidney Brown, co-owner and chief executive of

 Industries, a trucking and warehouse provider for some of the country’s biggest retailers.

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