For years, supply chain professionals have toiled in obscurity while making the global economy run smoothly. When the Covid pandemic threw a wrench into the supply chain’s well-oiled machine, supply chain challenges were suddenly front-page news. As a result, for the past two years, supply chain professionals have been struggling to correct flaws that were amplified during troubling times. Many of the 2023 supply chain trends identified by experts address recent supply chain troubles. Supply chain journalist Sreelakshmi Kalidhoss writes, “Although it can be challenging for supply chain managers and business executives to keep up with these developments, doing so is essential to maintaining the resilience of your supply chain and boosting the success of your company. Staying ahead of the supply chain management (SCM) trends that are influencing SCM’s future is preferable to following change’s heels.”[1]
Supply Chain Trends
Trend 1. Digitization. Digitization is an ongoing, rather than a new, trend. Investment analyst Adam Johnson writes, “Digitization is a must for guaranteeing the supply chain’s future.”[2] He adds, “Successful supply chain digitization may streamline, mobilize, add resiliency and strengthen a supply chain to aid a company’s bottom line. … Supply chains and organizations cannot afford to ignore digitization.” The main purpose of digitization is to obtain a better understanding of how the supply chain is working. Understanding improves as more and better data is obtained and analyzed about ongoing supply chain operations. Freelance writers Michael Keenan and Kaleigh Moore report, “Data from the University of Texas–Austin suggests a simple improvement in ‘data usability’ can give some companies a 10% increase in revenue. But while data usability usually translates to improving sales and marketing processes, it can also provide more flexibility with supply chains.”[3] Maggie Barnett, Chief Operating Officer of ShipHero, told Keenan and Moore, “With the widespread application of automation, AI, and other technologies, it’s critical to have data that can help those technologies become even more efficient and intelligent.”
Trend 2. Decoupling from China. Steve Banker, a Vice President for SCM at ARC Advisory Group, observes, “The US is greatly expanding its attempt to slow Beijing’s technological and military advances. It is not just US tool manufacturers that are affected. Both American and foreign companies that use US technology are being required to cut off support for some of China‘s leading factories and chip designers. The goal is to set China’s chip manufacturing industry back by at least a decade.”[4] According to Banker, these actions are a result of continued Chinese authoritarianism. He explains, “When the US agreed to a free trade agreement with China in 1999, the theory was that as more and more Chinese entered the middle class, China would become more democratic. That did not happen. What happened instead was massive theft of intellectual property, huge trade deficits, the hollowing out of the middle class in Europe and North America, and the rise of nativist politics.” Other experts have noted that decoupling from China won’t be easy. Nevertheless, Banker concludes, “When it comes to building new factories, the term ‘ABC’ is being used — anywhere but China.”
Trend 3. Sustainability. Journalist Chris Morris writes, “While geopolitical and labor issues are significant concerns, ecoclimate issues could present just as notable a roadblock for shippers. Low levels in Germany’s waters are impacting economic activity. And in the U.S., the Mississippi River is seeing falling water levels, which has resulted in a log-jam of over 100 vessels. There are heat waves in China and hurricanes are becoming stronger than ever. All of these present an opportunity to disrupt supply chains around the world.”[5] Impacts of climate change are moving sustainability efforts higher on the list of priorities being addressed by supply chain professionals. Johnson predicts, “Changing consumer demands and stricter government regulations will continue to push companies toward green practices in 2023. Businesses will continue to search for and adopt sustainable efforts, from sourcing sustainable raw materials to evaluating greenhouse gas emissions in transportation. Furthermore, circular supply chains, where manufacturers refurbish discarded products to then return or sell back to customers, is becoming increasingly popular. Whether they realize it or not, consumers will be purchasing more recycled and refurbished goods in the coming years.”
Trend 4. Cybersecurity. As supply chains become more digitized, cybersecurity concerns increase. The staff at Flat World Global Solutions explains, “Just like other industries, cybersecurity is a growing concern in supply chain management. According to one report, software supply chain attacks in 2021 grew by more than 300% compared to the year before. Cyber-attacks on supply chains run the gamut from holding data hostage for financial gain to stealing confidential customer information. If they haven’t already, companies in 2023 need to assess their digital supply chains for risk and prepare for and protect themselves from potential attacks.”[6]
Trend 5. Inventory Confusion. Experts can’t agree on what inventory management will look like in 2023. Keenan and Moore write, “According to McKinsey, 47% of companies amid the COVID pandemic (May 2020) planned to increase inventory supplies. Within the past 12 months, the number of companies planning on doing the same has increased to 60%. But there’s more complexity required than simply increasing inventory. Companies also have to find new sources of this inventory, often turning to regional sources rather than relying on global shipping.” The staff at Flat World Global Solutions predicts there will be “a return to lean inventory management — somewhat.” They explain, “As the logistics industry stabilizes, this trend [towards keeping higher inventory levels] will likely reverse.” They suggest “suggest supply chain managers take a middle-of-the-road approach: keeping a bit more inventory on hand than pre-pandemic in case any supply chain issues pop up again.” That sounds a lot like a just-in-case strategy rather than a just-in-time strategy. Morris adds, “Consumer demand is likely to be reduced in the months to come. And that could make things even more challenging for the shipping/supply industry on a different level. … Put another way: Lower demand could result in oversupply.”
Concluding Thoughts
In spite of inflation, recession, continued infections, labor challenges, and geopolitics, Morris optimistically concludes, “While it won’t quite be the ‘normal’ we all fondly remember, signs are now pointing to a better year in general for supply chains in 2023.” The fact that so many challenges remain means that supply chains must continue to become more agile. Astrid Eira, a B2B expert at FinancesOnline, concludes, “To ensure stability and maintain high service levels, companies must make sure that their supply chains are agile enough to cope with natural disasters and the shifting availability and costs of raw materials. Supply chain managers can take advantage of supply chain modeling solutions to predict scenarios and identify potential problems. This way, they can plan the best responses to disruptions.”[7] The Enterra Global Insights and Decision Superiority System™ was designed to do just that. With so much uncertainty about how the future will unfold, using the latest data to help identify emerging trends and provide insights about how to respond to those trends is essential for maintaining a competitive edge.
Footnotes
[1] Sreelakshmi Kalidhoss, “7 Supply Chain Trends in 2023,” GoComet Solutions Blog, 28 September 2022.
[2] Adam Johnson, “Supply Chain Trends For 2023 To Guide Investors,” Stock Investor, 12 October 2022.
[3] Michael Keenan and Kaleigh Moore, “Supply Chain Trends That Will Shape 2023,” ShopifyPlus, 21 October 2022.
[4] Steve Banker, “Top Supply Chain Trends Heading Into 2023,” Forbes, 2 November 2022.
[5] Chris Morris, “6 trends shaping the global supply chain in 2023,” Fast Company, 23 October 2022.
[6] Staff, “2023 Supply Chain Trends: What You Should Know,” Flat World Global Solutions, 19 September 2022.
[7] Astrid Eira, “14 Supply Chain Trends for 2022/2023: New Predictions To Watch Out For,” FinancesOnline, 6 November 2022.
