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The top 5 issues anticipated to impact supply chains in 2023

The top 5 issues anticipated to impact supply chains in 2023

You wouldn’t be wrong to feel as though supply chains have rarely faced more chaos and unpredictability than they do today. Despite the optimism in the early days of last year as businesses looked forward to a year of relative stability after having endured two of the most tumultuous years over the course of the pandemic and its fallout, new issues quickly arose to make 2022 uniquely challenging. And 2023 seems poised to place those same businesses back on shaky ground.  

Of course, the state of the world, and the state of global supply chains, are wildly different today than they were 12 months ago. However, with reduced consumer purchasing power, global instability, continued supply chain snarls, and a looming recession, different does not necessarily mean better.

With that in mind, here are five predictions on what businesses can expect to see in the year ahead.

1. Supply chain resiliency will take center stage 

The pandemic has underlined the vulnerability of our connected world when it comes to supply, while cyberattacks have exposed the security vulnerabilities of our systems. In addition, inflation is presenting a further set of challenges for us. It’s now clear that in order for the market to take a sudden turn again, there would need to be an occurrence that significantly impacts US supply chains. In recent years we’ve seen examples like 2014’s Freeze of Chicago, 2017’s Hurricane Harvey and more recently the coronavirus pandemic, and while something similar won’t likely recur soon, there is still a degree of unpredictability that must be factored in by management teams from multiple industries when considering both economic uncertainty and potential geopolitical developments.

There is still a risk of further and uncertain disruption in the midst of ongoing concerns about a regional or global recession, high inflation, and increased living costs, and as such, supply networks need to be augmented with greater resilience and agility in order to remain competitive. By doing so, we can better anticipate potential disruptions and buffer their impact on the business on an operational and financial level.

2. Ever increasing digital sales channels will bring new challenges

It’s anticipated that in the U.S., ecommerce revenue will reach $1.111 trillion in 2023, but traditional online shopping is just one aspect of digital sales to consider today. Cloud-based computing and personalization is getting to the point where both the online and physical stores that customers frequent know them well enough to provide tailored options and recommendations on everything from subscriptions to schedule delivery of their regularly purchased items to arranging for bulky purchases to be shipped direct to their doorstep through seamless digital options presented at checkout. While these types of services have existed for some time, their increasing prevalence and accessibility across all sales channels will inevitably cause a rise in the number of customers utilizing them.  

Even though getting products to customers appears easier than it did during the pandemic, it won’t be straightforward or cost-effective. While omni-channel fulfillment will see a continued increase, there are now more methods and channels of consumption than ever before, and costs remain high due to complex manufacturing issues plus customers’ heightened expectations. Last mile delivery is a common obstacle, combined with the reliance on suppliers who are often facing their own hardships. As a result, global and local retailers may need to look again at their stock distribution system and establish a smooth shopping experience with unified commerce as the focus.

3. Sustainability initiatives will continue to cause a buzz, but most will fall short

Most companies’ objectives and mission statements focus on sustainability. Our worldwide supply chains are a key contributor to the climate crisis and offer chances for reaching climatic targets. In 2023, regulators and other influential parties like customers and the finance sector could ask for decreased scope 3 emissions control. Businesses may be expected to make wise choices which decrease those emissions and simple ‘greenwashing’ won’t be tolerated. Nevertheless, many firms’ good environmental goals haven’t been achieved yet, and this is likely to continue in 2023. In a recent IBV survey covering manufacturing-oriented industries, 86% of executives said their organizations had a sustainability strategy, although only 35% put it into action.

However, there has been a shift in investor activity towards organizations that can prove their scope 3 emissions are low. Global banking institutions, private equity and venture capitalists are increasingly wanting to align their portfolio with sustainable organizations — a trend that is likely to increase in 2023. As a result, this factor may the one to push businesses to move beyond siloed, corporate-level initiatives.

4. Despite recent layoffs in the industry, talent shortages will continue 

Talent/skills retention, reskilling and development along with process automation will be brought back to the fore in 2023 for business, technology, and supply chain operations control and management areas. Supply chain leaders have faced a severe labor shortage lately due to external factors like the pandemic, inflation, and political instability; something that has left a deep mark in multiple sectors. And while a lot of the focus has been on recent layoffs across the industry, that mark is likely to persist. A combination of labor disputes, the retirement of the baby boomer generation, and workers simply becoming more selective about who they work for mean that many businesses and technology companies in the supply chain space are still finding it difficult to attract enough talent to fill their ranks. This issue is undeniably intricate and needs to be tackled.

Over the past year, investing in a cloud-based digital transformation strategy was a key trend in allowing a small team to manage an increasingly volatile supply chain, and many businesses have looked to it as an answer to their diminished workforce. This trend is anticipated to increase further in 2023 as businesses employ technology to counter the effects of the labor shortage along with the challenges brought by increasing inflation and economic stability. But while technology can certainly help to fill some gaps to allow a business to “do more with less,” there remain plenty of gaps that need to be filled by people, and those areas will feel the biggest impact.

5. Geopolitics will reshape supply chains, resulting new areas of congestion

Geopolitical tensions have led nations to become wary of cooperation and interdependence, which is understandable when it comes to the supply chain. If tensions were to worsen, essential materials might not be available or trade routes could be shut off. As a result, governments and industry authorities have been increasingly looking towards domestic self-sufficiency and forming partnerships with geographically close partners (‘nearshoring’) as well as alternative offshore partners in countries that they believe they can trust for secure access to goods.

While this shift will decrease risks due to reduced reliance on certain countries or regions and increased sustainability from shorter shipping distances, it will also reshape some of the world’s largest supply routes. The infrastructure needed to manufacture and transport goods needs time to mature, and the U.S. is already short of around 80,000 drivers needed to handle current needs — a number that’s predicted to double by 2030 — let alone the warehousing and manufacturing infrastructure needed to support such a move. So while bringing production closer to home will certainly bring numerous benefits, there are concerns over how to adapt to the influx before solutions are worked out, and new areas of congestion are likely to be seen.

What’s next?

In 2023, it’s becoming increasingly clear: businesses must be prepared for the unknown. Worldwide conflict doesn’t appear to be subsiding and the economy remains volatile. This means that the future may be chaotic, but as we learned over the course of the pandemic and throughout the challenges of 2022, those who can adjust properly will benefit the most. It’s essential that businesses are set up to be able to roll with the punches and grasp the opportunities that these challenges provide. And those who are first to adapt could find themselves emerging even stronger in 2024.

For more information on how Shipwell’s technology can help you to stay ahead in the months ahead and keep your supply chain on track in the face of uncertainty, talk to an expert today.