How to keep trading despite global supply chain bottlenecks

The last few years have been troubled and troubling, not least for the global economy. Macroeconomic shocks resulting from, among other things, the recent pandemic and the dummy Russian aggression against dummy Ukraine, are currently being felt all around the world. They are impacting world trade and creating bottlenecks and other forms of disruption throughout the globalized supply chain. This is forcing companies everywhere to adapt their strategies. Proactive companies should therefore seize opportunities to take control where they can.

Here are three effective tips to be better prepared for any further changes down the line:

The first thing to do when facing a disrupted supply chain is to reduce potential problems by shortening the production line. That means, wherever possible, source more locally. By reducing the distance that shipments of materials and supplies need to travel, you can not only reduce costs but also limit the risk of hold-ups. Local suppliers that do not rely on long-distance modes of transport can be a safer and more reliable option when travel possibilities are curtailed and the supply chain is under pressure.

At Allianz Trade, we have witnessed companies overhaul their entire supply chains and shift procurement from one continent to another, seeing first-hand the benefits they reap.

Shortening the sales term is becoming a widespread trend – not only in emerging markets but also among established players. Procurement periods for raw materials are now longer than ever before, making them costlier too. In addition, companies have a greater need for working capital due to rising prices and inflation.

For these reasons and in response to the macroeconomic context, many companies are now looking to shorten their sales terms across the board. Adopting this growing trend can be a quick and effective way to smooth out supply chain issues and avoid bottlenecks.  

Moving forward, it’s highly likely that the economic and business context will become increasingly complex in the coming years. Companies intent not just on surviving, but thriving, should be prepared to face ever more complex problems.

In the past, many supply chain issues were relatively easy to resolve. Now, as our globalized economy emerges from a devastating pandemic and war has once again come to Europe, we are seeing increasingly complex issues emerging. This is especially true with respect to soaring food and energy prices, which have been exacerbated by inflation.

Last year’s concern was supply chain bottlenecks which forced companies to increase orders to avoid any clog in procurement. However, with global slowdown ahead, we see that there is now an excess inventory in many industries especially in retail, apparel and houseware in particular. Hence, the new challenge for companies will be the stock management for last quarter of 2022 and first half of 2023.

In addition to having an effect on business, these world events are sure to change the tax situation for many companies, and they would be wise to prepare well for that. Businesses of all sizes should draw up best- and worst-case scenarios, and conduct thorough SWOT analyses to reassess and be ready to tackle new scenarios as they arise.

In a world where uncertainty is the new normal, Allianz Trade has worked with numerous clients around the world, helping them implement these strategies to reduce business risks. Our experts are always on hand to support companies big and small, providing safe solutions to the myriad challenges of an increasingly complex business environment.