The logistics constraints that have disrupted the supply chains of several businesses, including local restaurants, are expected to be a burden until next year, adding pressure for prices of basic commodities to further increase.
In an interview with the Inquirer, Supply Chain Management Association of the Philippines (SCMAP) president Pierre Carlo Curay explained that both Russia’s war on Ukraine and pandemic-induced restrictions had resulted in logistics bottlenecks that make it more expensive for goods to move from one place to another and for raw materials to be processed into finished goods.
Among the restaurants that recently expressed troubles with supply chains were Mang Inasal, Mary Grace Cafe and McDonald’s Philippines.
“Outside of the immediate disruption in transport lanes on sea and air, the continuing rise in fuel prices caused by the war has added to the strain logistics providers are already experiencing due to lockdowns,” Curay said. Oil prices have breached $120 per barrel.
Along with this, he flagged the rising energy costs, which would also drive up operations costs in warehouses and other logistics facilities.
Renegotiations
“The impact of these rising costs will be seen when major shippers begin renegotiating their rates with their logistics partners,” he added.
At the same time, the SCMAP official took note of backlogs in shipments during the pandemic, which has been adversely affecting supply chains.
Industry sources observed that shipping delays began during the latter part of 2020 when production regained momentum after a series of COVID-19 lockdowns as demand slowly recuperated.
Unfortunately, there were not enough vessels to ferry the finished goods and raw materials across the sea due to container imbalance amid the uneven pace of the reopening of the borders, leaving containers piled up at the ports or warehouses.
“The disruptions will continue up until next year at the earliest,” Curay said.
“Apart from the disruptions caused by pandemic-related lockdowns, ongoing geopolitical disruption … continue to have an effect on our prices, which means higher prices in the foreseeable future,” he added.
The Philippine Statistics Authority recently reported that May inflation accelerated to 5.4 percent from 4.1 percent the previous month due to higher food and transport costs.
Curay lamented that logistics firms can only do “little” in the short term to address the supply chain constraints, such as talking to clients about the current dire situation.
“We have to set expectations, and continue collaboration to ensure we can continue to provide satisfactory service to our customers,” he pointed out.
The SCMAP official suggested further investments in technologies to mitigate disruptions and improve cost and operational efficiency in the long run.
According to Allianz Risk Barometer 2022, supply chain disruption is among the top global risks businesses are watching out for this year.
“Companies have had to close or scale-back production where they have been unable to secure critical components, or forgo sales as the result of capacity issues, such as constraints on container shipping or labor shortages,” it explained.