1. Sustainability is on the supply chain agenda
From falling water levels in the Mississippi River to heat waves in China and a scorching summer across Europe – the impacts of climate change have never been more apparent. In 2023, supply chains will face the risks of climate disruption – and also bear a great responsibility to improve the situation by reducing emissions and improving sustainability.
Governments are demanding more from companies to prove that they operate sustainably and ethically. In Germany, the world's fourth largest economy, a Supply Chain Due Diligence Act will come into effect in January 2023 – requiring businesses to monitor their entire supply chains (another reason why strong supply chain visibility is key) and report on partners causing environmental degradation. The European Union is working on similar legislation that could go even further.
2. Beware of oversupply in supply chains
The October 2022 Logistics Manager’s Index (LMI), reported that 'inventory seems to be sitting idly (primarily downstream) clogging warehouses where retailers hope for a busy Q4.'
This is good news for carriers because, as LMI reports: 'the normal peak season for carriers has not materialized, as there has been less to move than we would usually see during this time of year.'
This increase in inventory has been a response from businesses to the shock of the pandemic to their supply chain systems – as well as the boom in e-commerce, and online retail and shutdowns sent people inside and online.
Many businesses have shifted away from a 'just-in-time’ supply chain approach to ‘just-in-case' – ensuring that they have plenty of inventory in warehouses ahead of time. As LMI notes, this may have helped to spread typical peak seasons throughout the year, easing the load on already strained carriers.
However, as economic downturns bite and a recession looms, consumer demand is likely to fall in 2023. As ING reports, receding demand could meet over-supply causing fresh difficulties for businesses and their supply chain planning.
3. Economic uncertainty meets difficulties in the labour market
Since we're on the topic of economic downturns, it's probably time to acknowledge the elephant in the room. The potential of a global recession will loom over 2023.
In the US, consumer prices were up 9.1% from June 2021 – June 2022. That's the largest increase in 40 years. In October, Eurozone inflation was even worse, at 10.7%. That's the highest monthly reading since the Eurozone's creation. The energy crisis gripping Europe and the war in Ukraine only add further uncertainties.
Not only does this indicate a drop in consumer demand, but we also see the wider fallout of the economic downturn in labour disputes and strikes. As workers in key industries seek greater protection and better pay, strikes have already taken place in the US, UK, Germany, South Africa and South Korea.
All of this can feel overwhelming, and many of us will throw ourselves into the day-to-day of our work or our businesses to keep the economic crisis at bay. But now might be the best moment to stop and take stock of where you are and what steps you can take to improve efficiency or reduce costs in the coming year.
4. Improve supply chain visibility to prepare for the next risk event
Climate change, economic uncertainty, labour disruptions. These challenges point to the importance of supply chain visibility in 2023.
Before the Covid-19 pandemic, many businesses did not concern themselves too much with the prospect of major supply chain disruptions. The global supply chain wasn't without its challenges, but for the most part, it ran like a finely tuned watch. If incidents or challenges did occur, they have often considered 'black swan' events – things so improbable and rare that it would be difficult to predict them even if you tried.
A few years later and the conversation changed. The pandemic – a black swan if ever there was one – caused a global shutdown and disruption that we're still dealing with today. It also laid bare the weaknesses in many businesses’ supply chain operations and visibility.
The reality is that many businesses still have little visibility of their supply chain. In fact, as little as 6% of companies report full visibility of their supply chains. Almost 70% do not have total visibility.
This is a big gap that could close in 2023. The next risk events aren't lurking in the shadows. They’re more predictable and long-term – whether it's climate impacts, conflict or economic instability. Visibility is one of the most important aspects of supply chain management in dealing with risks – and with the digitalisation of logistics, there are greater tools at the disposal of businesses to get real-time data, digital documents and tracking.
5. Better supply chain forecasting for a better customer experience
According to McKinsey, 32% of businesses blamed poor forecasting over anything else for Covid-related supply chain issues.
With a clear need for greater visibility and resilience in supply chains next year, supply chain forecasting has never been more important. Forecasting can help you stay on top of inventory and improve strategic planning for different risk scenarios. And perhaps even more importantly, it can improve your customer experience.
You may not think it, but supply chains are a key part of the customer experience. Once your enticing marketing and product value have convinced them to buy, your supply chain has to deliver. And as fresh disruptions have the potential to take hold in 2023, delivery delays will be a reality at times.
Strong forecasting can help you see where these issues might arise in good time. Allowing you to keep customers informed of delays before they need to send you an email or share their frustrations online.
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