Page 12 - ISQ UK_October 2017

INVESTMENT STRATEGY QUARTERLY

Spotlight on Supply Chains

Tracey Manzi, CFA, Investment Strategist, Investment Strategy

Supply chain disruptions have wreaked havoc on the
global economy since the pandemic began nearly two While supply chain constraints remain severe,
years ago. The logistical challenges of balancing factory there are tentative signs that some of the log-
shutdowns, health concerns, and an unprecedented jams are beginning to ease.
demand surge have created bottlenecks across nearly
every aspect of the global supply chain. While supply chain be seen in the sharp acceleration in the Institute for Supply Man-
constraints remain severe, there are tentative signs that agement’s (ISM) Supplier Deliveries Index. This timely measure,
some of the logjams are beginning to ease. which captures the extent of supply chain delays in an economy,
is running near its highest levels since the 1970s. While it is not
SIGNS OF PEAK BOTTLENECK unusual to see readings above 50 during economic recoveries,
the lengthy delays have been exacerbated by exceptionally strong
For much of the last year, media headlines have been dominated demand for goods during the pandemic, factory closures across
by stories of port congestion, labour shortages, product delays, key global manufacturing hubs such as China and Southeast Asia,
and elevated shipping costs. It should come as no surprise that and escalating shipping costs.
supply chain disruptions have emerged as one of biggest buz-
zwords in 2021, not only in company earnings calls, but also Although Asia was among the first to emerge from the pandemic,
among consumers. The White House has even appointed a task new waves of infections and low vaccination rates forced author-
force to address transportation and logistics bottlenecks stem- ities to reimpose restrictions earlier in the year. This came at a
ming from the pandemic. Not to make light of the seriousness of time when vaccination rates ramped up sharply in other parts of
the situation, but when a market trend is splashed all over the the world and economies were kicking into high gear. With the
news or makes its way onto the cover of a magazine, it usually global economy not in sync, the factory shutdowns across Asia
indicates the trend has reached a turning point. aggravated an already overwhelmed supply chain. After months
of growth-sapping lockdowns and significant improvements on
Supply chain logistics are notoriously complex, but one of the the vaccine front, restrictions were relaxed, with many countries
clearest measures of the disruptions caused by the pandemic can

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