The supply chain landscape in the current decade has been a captivating, demanding, and momentous period on a worldwide scale. Although indications suggest that 2023 will be relatively more conventional, the industry is still progressing and expanding. Our panel of specialists has offered their forecasts regarding the key areas of emphasis for supply chain managers in 2023.
2022: A YEAR OF RECOVERY FROM SUPPLY CHAIN DISRUPTIONS
Naturally, our projections for 2023 are influenced by the events and supply chain trends of 2022. Supply chains spent much of the year striving for equilibrium following two years of tumult brought about by the Covid-19 pandemic. In the meantime, the decrease in consumer spending due to inflation and diesel prices helped to moderate the situation. Although carrier capacity gradually expanded, gas prices kept any other rate reductions in check.
Carriers, who had significantly hiked their prices in 2020 and 2021, began submitting new, reduced offers to shippers. Suddenly, after years of having none, shippers found themselves with some bargaining power.
What does all of this signify for your supply chain in 2023?
WHAT SUPPLY CHAIN PROFESSIONALS CAN EXPECT IN 2023
There will be various factors that will shape the trends in supply chain management in 2023, including technological advancements, economic developments, and global affairs. Below are the key areas that we anticipate to be of great significance in the global supply chain industry in the upcoming months.
Businesses will shift from reactive to proactive – and from survival mode to growth mode
Over the past two years, numerous supply chain management professionals have been grappling with one supply chain crisis after another. Due to the constraints and limitations at hand, decisions were made based on availability and affordability. As the supply chain constraints begin to ease and companies continue to transition towards normalcy, there will be a shift from a reactive to a proactive approach.
We anticipate that more supply chain managers will reassess their overall supply chain strategies and explore potential new business models. With some breathing room, they will be able to scrutinize what is functioning well and what is not, ranging from manufacturing and transportation to storage and distribution.
Our suggestion is to keep the long-term objectives in mind. During the pandemic, businesses had to learn how to adapt quickly, and agile supply chains proved to be a significant advantage. However, as the industry rebalances, it is important not to overreact to changes. In 2023, it is recommended not to panic too quickly and to consider long-term objectives and trends while making decisions.
Carriers will lower rates and improve service
One of the most encouraging trends for 2023 is the persistent decline in carrier rates.
During the pandemic’s peak, consumer spending on goods surged, and carrier capacity dwindled. Consequently, carriers hiked up their rates for sea and land transportation, and service levels deteriorated due to transportation backlogs caused by labor shortages and lockdowns. Shippers were left with minimal choices but to cope with delays and other issues.
As demand has stabilized, capacity has increased, and backlogs have diminished, this trend has started to reverse – and we anticipate that the industry will continue to restore balance in 2023. However, some accessorial fees, such as those for overlength and over-dimensional freight, may persist for some time. Besides lower overall freight expenses, you are likely to observe better customer service, as carriers once again have to compete for business and customer loyalty.
A partial return to lean inventory management
Supply chain disruptions also led to another trend: stocking up. Prior to 2020, businesses primarily focused on lean inventory management, keeping only the necessary items in stock. However, during the pandemic, this supply chain strategy did not prove effective, as companies ran out of products for weeks, months, or even more extended periods. To prevent supply chain disruptions and shortages, businesses began to stock inventory and invest in warehousing and storage.
As the logistics industry returns to normalcy, this trend is expected to reverse. We recommend that supply chain managers adopt a moderate approach: maintaining slightly more inventory than pre-pandemic levels in case any supply chain issues resurface.
For manufacturers, reshoring and nearshoring will be a top priority
To cope with the supply chain challenges caused by the pandemic, some companies pursued a different approach than increasing inventories. Several of our clients decided to reshore or nearshore their manufacturing processes, relocating from Asia to the United States, Mexico, or a nearby country. While this practice has advantages and disadvantages, such as the higher cost of manufacturing in the United States and Mexico compared to Asia, faster transit times, and the potential to avoid issues arising from shortages and backlogs, we anticipate that more companies will follow suit and reshore or nearshore their supply chain components in 2023.
Visibility, data, and digitization will continue to reign
Out of the various supply chain technology trends we’ve observed, this particular trend is expected to have the most enduring impact.
Visibility pertains to the capacity of supply chain managers to monitor goods and shipments across the entire supply chain, from raw material procurement and transportation to production and distribution. And for good reason: supply chain data and visibility can significantly benefit various facets of a business, including meeting customer demands and improving profitability.
The most effective software solutions for visibility also combine multiple management systems, such as warehouse management systems and enterprise resource planning tools. These integrations can eliminate manual processes (and the potential for human error), thereby boosting efficiency and accuracy. In 2023, technology that prioritizes data and visibility will be highly sought after, since strategic technology integration can enable supply chain managers to optimize their supply chains from end to end.
Digitization is also becoming more prevalent, with carriers and even government agencies beginning to require electronic documents. Given the industry’s traditionally paper-heavy practices, these trends will urge companies to prioritize digital transformation.
Geopolitics will continue to influence supply chains
Supply chains have always been influenced by geopolitics, but recent international events have brought this topic to the forefront of discussions. The ongoing Russo-Ukrainian War has the potential to disrupt global supply chains for an indefinite period of time. Additionally, any shifts in the trade relationship between the United States and China could significantly alter the landscape of American imports.
Advanced tech, like drones, robots, and AI, will launch
If you have been following the latest updates on industry publications such as Supply Chain Dive, Freight Waves, and Supply Chain Management Review, you might assume that autonomous trucks, drone delivery, and warehouse robotics are just a step away. However, the reality is that this technology is still in the early stages of development and implementation, and it will take some time before it becomes widely adopted.
Businesses will focus on cybersecurity – or pay the consequences
Like other sectors, supply chain management is also witnessing a rising concern over cybersecurity. In 2021, software supply chain attacks increased by over 300% compared to the previous year, according to a report. Cyber threats in the supply chain range from financial extortion to stealing confidential customer data.
To avoid any such incidents, businesses should evaluate their digital supply chains for vulnerabilities and be ready to protect themselves from potential attacks in 2023.
For e-commerce brands, zone skipping and returns management will be key
As e-commerce continues to expand, returns management will become increasingly important. Companies with high return rates will seek ways to automate processes and reduce return costs, including charging for return shipping, limiting return windows, and collaborating with multiple carriers to obtain the best price. Processing returned merchandise will also be a challenge, as items may need to be sent to various locations depending on their final destination. In 2023, we anticipate that more businesses will search for strategically placed distribution centers to accept and handle returns.
Zone skipping, a method of bundling many small parcel shipments for the longest transit leg before separating them for the final, shorter leg, will also grow in popularity in 2023. Although underused in the parcel sector, zone skipping is gaining recognition as shippers recognize its benefits. Partnering with third-party logistics providers is typically the best option for companies looking to employ zone skipping in their supply chain or enhance their returns management process.
Consumer demands will increasingly include sustainability and circular supply chains
Sustainability is anticipated to be a significant trend that will persist and expand in 2023. The shift in consumer preferences and tighter government regulations will continue to urge businesses to adopt environmentally friendly practices. Companies will seek to incorporate sustainable practices, such as sourcing eco-friendly raw materials and reducing greenhouse gas emissions during transportation. One noteworthy development will be circular supply chains, where manufacturers restore discarded products for resale or repurpose. Consumers will also purchase more recycled and refurbished goods in the coming years, without necessarily being aware of it.
Several upcoming trends in supply chain management involve significant changes, such as adopting new manufacturing sources and upgrading technology. However, implementing these changes can be challenging, and it is essential to ensure that your company can receive a substantial return on investment.