2021 will be remembered among the most challenging years of all time. Business conditions were, to say the least, tougher than any of us have ever endured. Boats turned sideways, insane freight charges, capacity problems, material costs, labor shortages, power outages – each week, the headlines became increasingly surreal.
We’re often asked…when do we expect things to ease up? Looking ahead, here’s our take on what’s in store in 2022, and we welcome your input.
- Material pricing. Until demand eases, pressure will be high on factories to make and ship, and pass along material price hikes to buyers. Material prices continue to be volatile. If you’re seeing constant price pressure from suppliers, perhaps you’ll find CMD’s April 2021 article still useful, “Hit with a Price Increase? Seven Tips for Negotiating with Suppliers” which made Industry Week’s top content of 2021 list.
- Exchange rates. While recently we saw signs of the RMB strengthening, there are a number of economic challenges looming. Roughly a third of GDP is tied to real estate, which moves it into the ‘too big to fail’ category.’ Market stability has always been a core value and as cash is conserved to preserve it, exchange rates may pay the tuition.
- Freight. Containers and their chassis are still not in the right places in the world. Just last week, over 100 ships were awaiting berth at Los Angeles / Long Beach, a new all-time record. Many large cargo ships were taken offline during Covid for maintenance, and it will be at least another year before we see that capacity back online. Until then, we believe pressure will remain high to rush containers back to Asia vs. picking up containers in remote places and restoring balance in container flow.
- Covid. Alpha, Delta, Omicron – new strains keep coming, and China takes vigorous containment measures. Every day our team keeps a pulse on where movement is restricted, which team members are already in regions which overnight flip ‘yellow’ (borderline risk), and requirements for testing. As much as we all wish life would return to normal, the past couple of months have proven that covid will be with us for a while, increasing our sabbatical away from international travel.
CMD teams were deployed by clients to manage quality oversight of first articles on strategic new products, qualify new suppliers, consolidate shipments, perform diligence on acquisition targets, and more. Clients placed tremendous trust in us to be eyes and ears on the ground during this era when international travel is not practical. While there is no substitute for face-to-face, we’ve been pushed (out of our comfort zone – a good thing) to master the art of using remote technologies to execute work differently, which has been a silver lining of sorts. When things do eventually ease up, we think the long-term impact to global travel will be substantial. Will senior leaders question the need for business class trips, now that the planet adapted the art of remote work?
The bottom line? We believe we’re in for another 12 months of tough conditions. Integrity, key to CMD’s foundation from the beginning, has taken on new meaning this year. We truly miss having you come to see us in Asia, learn more about your brand, join us for onsite visits, and build key relationships on which your revenue (and reputation) depend. In the meantime, you’ve placed huge trust in us to be your brand ambassadors with your supply chain, to represent you with suppliers when your presence is not possible.
Thank you.
From everyone at CMD, we wish you and your families a holiday season full of shared memories. Merry Christmas, Happy Holidays, Happy New Year!