Top UPS Exec Warns Supply Chain Disarray Will Leave Permanent Scar

By Tyler Durden

UPS, one of the world’s largest delivery companies, expects global supply chain woes to carry into 2022. The disruption to the complex web of airports, seaports, and land ports, cargo freight and container shipping lines, and trucking companies that move goods worldwide remains strained and is expected to leave a permanent scar on globalization.

Scott Price, president of UPS International, told FT that multinational retailers and manufacturers are regionalizing their supply chains:

“A lot of companies are coming to us saying ‘where is the best place to put manufacturing and assembly?'” he said. “There’s an understanding that reliance on stretched supply chains puts you at risk.”

Price, who manages the company’s international businesses, said the pandemic downturn of the travel industry had made it challenging for companies moving large amounts of cargo in the belly of passenger aircraft.

He forecasted recovery in the air travel industry may take until 2025.

Price expects multinational companies to reshuffle their factories in Asia to North or South America to shrink supply chain footprints.

“One of the reasons it [supply chain regionalization] accelerated is companies were surprised how little optionality existed during this period,” he said.

Shipping prices for the Atlanta-based logistics company said annual price increase for customers would be about 2.8%, well below the 10-year average.

In a separate interview, Price told AFP News that:

“I half-jokingly tell people’ Order your Christmas presents now because otherwise on Christmas day, there may just be a picture of something that’s not coming until February or March.'”

A few weeks ago, UPS’ competitor DHL made a similar warning about congested transpacific shipping lanes.

“We do not expect freight rates to stabilize in the near term,” according to Karsten Michaelis, head of ocean freight at DHL Global Forwarding Asia Pacific.

“The combination of a year of disruption, lack of containers, port congestions and a shortage of vessels in the right positions is creating a situation where cargo demand far exceeds available capacity.”

Last Friday, new data from ports of Los Angeles and Long Beach, California, showed vessel congestion was at a record high.

The latest word from top shippers on the frontlines is that supply chain disruptions are not waning anytime soon and have pressured producer prices higher. The Labor Department’s August Consumer Price Index print will be released on Tuesday is expected to remain elevated.