It began with the pandemic. Consumer spending shifted from experiences to goods, spiking demand. Ports clogged due to shutdowns. Factories operated at reduced capacities from sickness, lockdowns, or even infrastructure issues like rolling blackouts.
But it didn’t end there. The ripple effects have continued. Supply chains continue facing upheavals, particularly with respect to inflated prices and global conflict like the war in Ukraine.
This leaves supply chain professionals on shaky ground. Predictability is necessary for proper planning, procurement, delivery, and more.
So are we out of the woods? And if not, how can organizations develop greater resilience to overcome future hurdles?
We asked four supply chain leaders for their opinions on supply chain trends we’re likely to see in 2023. Below is a brief summary of some themes our conversations covered—and how to adapt.
[Get complete insights and advice from four supply chain thought leaders with the report 2023 Supply Chain Outlook: Expert Advice on Thriving in Times of Change.]
To answer the question posed above: No, we’re not out of the woods; supply chain disruptions are likely to continue. For starters, ripple effects from the last few years will slow down deliveries and potentially hike up the prices of shipping and goods. During our interview with him, Peter Liddell, Partner at KPMG, noted how infrastructure investments in the US and EU that were part of economic stimulus efforts “led to a run on manufacturing goods from China, causing shipping prices to rise at astronomical rates and leading to containers getting backed up in major global ports.”
And newer disruptions have cropped up more recently that will continue into 2023. For example, geopolitical tensions are threatening supply chains—the war in Ukraine led to a drop in Ukraine’s wheat production and thus, food scarcity; energy prices spiked due to shifts away from Russian oil; and shipping issues were exacerbated because of shipping crews getting embroiled in the conflict. And simmering tensions between other nations indicate the potential for more conflict to break out.
The worst changes are unforeseen. Increases in climate-related storms, issues with technology, or rapid shifts in customer demand (such as the run on flu medicines in the United States) can all throw a wrench into supply chain operations. These hidden disruptions can shock a system already worn thin by pandemic ripple effects and geopolitical issues.
The past several years laid bare the precarious balance our supply chains are held in. The push for efficiency and keeping lean inventories led to an environment that allowed supply chains to break down too easily. In the coming year, we can expect to see companies take measures to increase their ability to bounce back from turbulence.
Supply chain managers will make heavy use of technology to bolster their resilience efforts. This can come in the form of digital twins, predictive analytics, or automation tools that act as early warning systems for supply chain disruptions and allow groups to plan accordingly. In fact, Deepak Mavatoor, Managing Partner at Tata Consultancy Services, touched on the importance of scenario planning technology in the pandemic. He said, “Some companies do sales and operations (S&OP) planning far more frequently—sometimes two or three times a week—which shifts the culture to be more scenario-planning-oriented.” This culture shift allows organizations to have plans in place if a disruption occurs—and to always be ready to swiftly bounce back.
Another major supply chain change we’ll likely see is a widespread shift in vendor preferences. There are a number of conditions driving this. Reliability is big—Liddell mentioned that many companies have shifted from using vendors in China to invest in other southeast Asian countries like Thailand or Vietnam that offer more predictability. International politics also drives some vendor changes, as war or embargoes threaten trade. Environmental, social, and governance (ESG) regulations have also begun requiring companies to take a second look at their supply chain partners, assessing them on everything from carbon footprint to social issues like labor practices.
When choosing vendors, consider the full costs of doing business. The risk of a vendor with a long transit route delaying orders may pose a higher cost to a business than a slightly more expensive vendor who’s closer and can be more agile with delivery. Vlad Filippov, Founder and CEO of Spark Equation, offered some sage advice in this area: He suggested asking vendors about their technology investments, stating, “Instead of choosing the cheapest vendor, look for those who are investing in technology to be more sustainable and efficient.” When you choose vendors that invest in modern technology, they’ll have better quality products and services—and that can be very beneficial to your business.
One common theme that nearly every respondent mentioned was labor shortages for different links in the supply chain: Truck driver positions remain largely unfilled. Manufacturing teams face widespread retirements leading to loss of institutional knowledge. And as mentioned earlier, shipping companies face a lack of skilled crew members, as many are being affected by the war in Ukraine. Plus, supply chains have become increasingly technical, requiring workers with unique skills.
Expect these issues to continue. Companies will have to rely on technology to bridge the gap. In fact, automation will play a critical role in moving forward successfully. Take planning tasks done by supply chain managers, for example. Joaquim Duarte Oliveira, Supply Chain & Network Operations Leader at Deloitte Portugal, mentioned, “In the near future, the vast majority of activities in supply chain planning will be handled by digital solutions, where predictability, scenario planning, visibility, and agility are the key elements, leveraged through decision intelligence and automation.” He claims that this will lead to planners dealing more with exceptions, instead of spending their time on the rote tasks they do today. It’s worth noting this also allows anyone across any supply chain role to accomplish more, faster.
Supply chain challenges are exceedingly complex, and a change at any one point affects everything else in the system. Raw material shortages stifle manufacturing production. Shipping disruptions spike costs and delay products. Truck driver shortages leave products sitting in warehouses and increase lead times.
You can’t always control these things. But you can control a lot about the processes you have in place:
First, digitize as much of your supply chain as possible. This means to digitize all internal processes, but it also applies to choosing technically savvy suppliers. Digitizing helps connect systems across the supply chain so you can get data faster and receive early warning signals if something goes wrong.
Second, automate what you can. Your business process automation strategy depends on what you do in the supply chain. Transportation companies might automate truck driver assignments, while retailers might automate restocking requests for procurement managers. Automation can play a critical role in developing more agility and resilience.
Finally, make sure you have the right technology to facilitate these steps. A good supply chain automation platform can help unify data quickly, easily, and securely via data fabrics. Process automation tools—from workflow-based, low-code design to automation tools like bots and artificial intelligence—let you build applications and orchestrate processes between teams and people. Process mining tools can help you find potential areas for improvement and continuously optimize your processes for greater efficiency. Finally, a good platform allows you to deploy across multiple platforms to give a complete experience for users. This is critical for employees working in low-connectivity environments on mobile devices in the field.
One thing is for sure: disruption will continue. Changes will only accelerate. Prepare yourself by reading the experts’ full predictions and advice in the eBook, 2023 Supply Chain Outlook: Expert Advice for Thriving in Times of Change.