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There will be a surge of containers from China when it resumes its economy, but no one knows when this will happen, how long it will take, and how backed up their domestic supply chains are. For now, we know the freight market is slowing and 🇨🇳 is only making things worse. 1/
The longer China goes offline, the more impactful to US supply chains and this could impact domestic production/distribution. Inventories are at record highs, but this could burn off quickly. 2/
The bigger question is how screwed up China’s domestic supply chain will be. Factories in China depend on upstream producers, also in China. We also don’t know the situation for raw materials coming into the country. 3/
Freight networks are bidirectional, meaning that the ships waiting off the coasts have some raw materials that are used in factory production. 4/
How long will it take to offload and transport these raw materials? No one knows. And since China is opaque, we don’t have good data on the situation on the ground. 5/
The longer China remains in lockdown, the longer it will probably take to resume normal production cycles. 6/
The big difference between this lockdown and the one in Feb 2020 is that the rest of the world is open and won’t be tolerant of disruptions. 7/
Consumers won’t wait for products - there will be demand destruction. And the Fed isn’t coming to the rescue. 8/
This will have long lasting impacts for decades to come. 9/
Supply chain professionals are already looking for alternatives - this will accelerate. We are seeing a surge in site selection freight modeling requests from supply chain organizations that want to move production closer. 10/
Cost is only one consideration in choosing a production site. Dependability is often more important. 11/
The cynics say North American reshoring will never happen due to cost. This was true for decades. But board rooms are now prioritizing supply chains in ways they never have before. 12/
Supply chain considerations are now getting priority and decision makers in supply chain orgs are gaining a lot of influence on corporate decisioning. 13/
Lower carbon emissions, higher dependability, and shorter lead times mean that near or on-shoring are more favorable than globalization. 14/
It won’t happen over night and not every industry will shift back, but it is happening and the most recent lockdown is only going to accelerate this movement. End.
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Michael Green @profplum99
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Apr 17, 2022
Great thread