NextGen Day

The logistics difficulties that have impacted the supply chains of various firms, including local eateries, are projected to persist until next year, putting additional pressure on basic commodity prices to rise.

In an interview with the Inquirer, Supply Chain Management Association of the Philippines (SCMAP) president Pierre Carlo Curay explained that logistics bottlenecks have resulted from both Russia’s war on Ukraine and pandemic-induced restrictions, making it more expensive to move goods from one location to another and to process raw materials into finished goods.

Mang Inasal, Mary Grace Cafe, and McDonald’s Philippines are among the eateries that have recently highlighted supply chain issues.

“Aside from the immediate disruption in sea and air transportation corridors, the war’s continued rise in fuel prices has contributed to the burden logistics providers are already under owing to lockdowns,” Curay said. The price of oil has surpassed $120 per barrel.

Along with this, he mentioned growing energy costs, which would raise warehouse and other logistics facility operating costs.

Renegotiations
“When large shippers begin renegotiating their tariffs with their logistics partners, the impact of these growing expenses will be seen,” he added.

At the same time, the SCMAP official said that during the epidemic, there were backlogs in shipments, which had a negative impact on supply chains.

According to industry sources, shipping delays began in the second half of 2020, when production regained momentum following a series of COVID-19 lockdowns, as demand gradually recovered.

Unfortunately, due to container imbalance and the unequal pace of border reopening, there were insufficient vessels to transport finished goods and raw materials over the sea, leaving containers piled up at ports and warehouses.

“At the earliest, the disruptions will last till next year,” Curay said.

“Aside from the disruptions created by pandemic-related lockdowns, continuous geopolitical disturbance continues to have an effect on our prices,” he added, “which means higher prices in the near future.”

May inflation increased to 5.4 percent from 4.1 percent the previous month, according to the Philippine Statistics Authority, mainly to rising food and transportation prices.

Curay bemoaned the fact that logistics companies can only do “little” in the short term to alleviate supply chain restrictions, such as talking to clients about the current crisis.

“We need to set expectations and keep working together to guarantee that we can continue to deliver satisfactory service to our consumers,” he said.

Further investments in technology, according to the SCMAP official, would help to prevent interruptions and increase long-term cost and operational efficiency.

Supply chain disruption is one of the top worldwide dangers organizations are watching out for this year, according to the Allianz Risk Barometer 2022.

“As a result of capacity challenges, such as container shipping limits or labor shortages,” it explained, “companies have had to close or scale-back production where they have been unable to source crucial components, or forego sales.”

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