The current economic cycle’s downturn presents a paradoxical scenario whereby there is a notable upswing in employment rates, yet a concomitant scarcity of skilled labor. In the United Kingdom, this phenomenon is particularly pronounced due to Brexit’s impact, which has severely limited the inflow of skilled laborers into the country. This situation has led to a stymied economic growth trajectory, which has compounded the challenges of inflation and the rising cost of living. In order to address these interrelated issues, a sustained shift towards the 2023 economy is imperative.
THE LASTING IMPACT OF INFLATION
Due to a scarcity of skilled labor and inflation, there was a significant economic disruption causing steep rises in the expenses of essentials such as food, fuel, and utilities. However, the good news is that the surge in prices has started to stabilize. For example, though the cost of shipping a container is currently $3,000, it was at a peak of $20,000 during the pandemic.
When consumers are informed of such price corrections, they can reasonably expect a subsequent decrease in the price of goods. However, as procurement experts are well aware, the dominoes have already begun to fall. Companies were still required to transport goods at a time when prices were at a record high, thus the supply chain and economy continue to experience the effects; however, these effects are expected to diminish towards the end of the year in 2023.
INVESTING IN CERTAINTY
In the past, we have experienced periods of intense negotiation. The problem is that this time, it is not simply a question of cost. We are facing a shortage of essential supplies, such as semiconductors, which are essential for the production of automotive components. This drastically changes the equation. As we have seen in previous years, starting the new year by focusing on obtaining items at the lowest possible cost is not an effective approach. Supply chain challenges and logistical costs further complicate budgeting challenges for procurers.
At the end of the day, a low price does not matter if your purchase orders are not fulfilled on a consistent basis. On the contrary, those who carefully balance price with certainty and security will win.
REPRIORITIZING SUSTAINABILITY
In 2019, the supply chain was heavily impacted by the need to prioritize sustainability. Companies made a number of decisions to be more environmentally-conscious, as well as to incorporate social access and inclusivity goals. However, during the pandemic, many sustainability themes were put on hold due to necessity. Business owners made significant sacrifices, including ESG commitments, in order to remain afloat. Even today, many businesses are struggling with the effects of an uncertain economic climate, but sustainability cannot be treated as an alternative.
A recent study has revealed that customers are more concerned with a company’s social responsibility than with the cost of its products or services. This is further evidence of a multi-generation preference for socially conscious products. Therefore, ESG efforts are an essential part of the business landscape for today’s companies. While ESG may not appear to be a pressing issue for some, it is worth investing in in the new year.
LEVERAGING AND AUTOMATING
The skills shortage is expected to continue to affect our economies in a variety of ways, both in terms of efficiency and production. Nevertheless, it is the responsibility of businesses to find solutions to alleviate the burden, likely necessitating the adoption of further technology. Automation will continue to occur, but at a more rapid rate, enabling companies to redeploy the available human labor into areas where they can better utilize their time and resources.
On a large scale, these changes are already taking place. For example, at airports, the need for multiple personnel to stand in long lines to check passengers and passports has been eliminated; instead, a designated location has been established to scan them. Administrators have also moved these employees to other essential areas of operations that cannot be automated. Similarly, a growing number of grocery stores are introducing self-checkouts, allowing employees to move from the registers to the stock rooms. This shift is already taking place across industries.
RETRAINING AND DEVELOPING
As the number of businesses reallocating human labor increases, so does the level of investment in that labor. For example, if a firm has a dependable team that has been hired for one task and is now required to perform a different task, they will need to invest in training to acquire the necessary skills to succeed in their new position.
In the coming year, it is anticipated that more companies will retrain their current workforces, which could have a minor effect on the current skills gap. Nevertheless, European countries with a declining population will not be able to address the labor shortage through corporate training sessions alone.
YEAR-END TAKEAWAYS
Business owners who are fatigued and disappointed after two challenging years should recognize that the year 2023 offers more potential than risks. In this competitive market, it is essential to be proactive and plan to make decisions that will propel the company forward with no second thoughts. To ensure success in 2023, it is important to anchor the year in an ambitious program phase to reduce the risk of downsizing. If this is achieved, the team can truly excel.
