IHS Markit predicts that the bottlenecks in the supply chain that have plagued this year will persist until 2022 and even 2023. The logistics dilemma is expected to worsen due to economic recovery, labor shortages, and overworked transportation infrastructure.
The Adverse Effects Of Supply Chain Delays
The extension of supply chain problems is to blame for “why online purchases are taking longer to arrive, why there is empty space on shop shelves, and why the furniture you purchased is taking months instead of weeks to arrive,” as reported by CNBC. Inflationary pressures due to low inventory levels are already impacting the industry as a whole, with certain products reaching their highest costs in over a decade.
Over the last two years, supply chain executives have had to cope with various issues. COVID exposed the vulnerability of global supply networks, making disruptions, delays, workarounds, and complete shutdowns commonplace. Problems in the supply chain are no longer hidden from the public eye. Now that 2022 is winding down and 2023 is just around the horizon, what can supply chain managers anticipate?
The path ahead is not without its obstacles. As of now, disruption has not been eliminated. Unfortunately, the headaches persist.
Will Supply Chain Issues Persist In 2023?
Unfortunately, they will. The state of the economy is still quite difficult. The high rate of unemployment is the main problem. The lack of available employment opportunities particularly hits those who have been out of work for a long period. Several businesses have started using contract workers to make up for staff shortages. That said, it’s not a long-term fix.
Businesses need to have enough employees to get everything done. Still, it would be counterproductive to recruit too many people and end up with extra stuff that isn’t needed. When there aren’t enough employees to accomplish the job, productivity might suffer from problems like low morale and high turnover.
7 Global Supply Chain Issues & Strategies to Succeed In 2023
Problems in the global supply chain might be triggered by occurrences anywhere in the globe. Natural catastrophes, worker strikes, and political instability fall within this category. A company’s bottom line and customer happiness might take a hit if its operations are disrupted. The following are the seven most pressing global challenges in the supply chain and the suggestions for resolving them in 2023.
1. Global Supply Shortages
Worldwide supply shortages are one of the companies most significant problems today. This is a problem since many essential resources must be purchased from faraway places and transported across oceans to reach their ultimate destination. Businesses that depend on these supplies may experience delays, complications, and higher expenses as a result.
The lack of supply is due to insufficient production. So, many companies have used automation to meet customer expectations and save expenses. Due to these shifts, more robot than human labor is needed to fill newly created positions.
Suggestions to Deal With the Global Supply Chain Shortages
One of the major problems for companies is a lack of materials to feed the global supply chain. Third-party logistics providers (3PLs) are being looked at by many businesses as a possible solution to supply chain issues, but transitioning to one may be challenging and time-consuming.
Third-party logistics providers (3PLs), who are in the business of overseeing the logistics of other organizations, may offer their clientele several advantages.
- Increased insight into supply chain information
- Enhanced capacity for stock management
- Improvements in Predictive Capability
- Cost savings in production processes
2. Global Trade Slowdown
One of the most important variables influencing supply networks today is the slowing of global commerce. A report by McKinsey & Company found that international trade volumes fell by 8% in the last year and are projected to fall by another 5% in 2021. This is partly attributable to geopolitical developments like Brexit and the US-China trade war and changes in consumer tastes toward products made and consumed closer to home.
At the same time, competition has increased from developing economies like India and Mexico, which have cheaper labor costs than Western nations. This has caused a significant movement away from China as a manufacturing destination, which has reduced supply chain efficiency and increased prices for internationally active businesses.
Suggestions to Deal With the Global Trade Slowdown
As opposed to depending on tariffs or currency fluctuations, businesses must instead work to strengthen their internal systems to counteract the slowdown. Improved inventory management techniques, such as JIT (Just-In-Time) replenishment systems, will allow for shorter lead times, leading to higher inventory turns and lower costs.
3. Investing In Digital Maturity & Cutting-Edge Technology
Investment in a cloud-based digital transformation plan was a major trend last year, and it’s expected to expand in 2023 as businesses look to technology to counteract rising prices and economic stagnation. In the past, supply chain and operational skills took a second seat during technological change, while improved consumer interaction took center stage. Significantly more resources will be allocated to improve supply chain visibility by increasing supply chain planning sophistication, warehouse and operational jobs automation, and end-to-end supply chain analytics.
Some of the most important names in the IT industry are shifting their focus to supplying chain platforms that include the whole process, which is helping to fuel this pattern. They attempt to streamline the customer experience by bundling all the supply chain features into a single platform rather than selling them separately.
Suggestions to Deal With The Technology Investment
Investing heavily in technology that aids supply chain planning and provides end-to-end visibility via real-time analytics is essential for ensuring seamless operational continuity. To make decisions based on insights rather than guesswork, you need to speed up your data management rules and capabilities and train your staff to use the technologies available.
Think about how you may make investments in automation to eliminate mundane manual tasks in your supply chain, boost productivity, and fortify your business against the threat of a profit margin squeeze and rising costs. Global Trade paperwork, Free Trade Agreement (FTA) compliance, trade tax computations, reconciliations, settlements, and reporting are all examples of highly manual tasks that may be automated.
4. Geopolitical Uncertainty
Studies show that in 2022, geopolitical unpredictability was the biggest problem for supply chains. The report polled over a thousand business leaders and showed that geopolitical uncertainty has increased from third to top among supply chain concerns. As far as corporate issuance goes, it likewise topped the charts in Europe and Asia.
There are numerous suppliers and partners all around the globe, making supply chains more global and complicated. As a result, businesses face several political risks, such as the closure of borders and the imposition of trade restrictions, which can potentially stop operations and prevent shipments.
After cyber risks (29%), supply chain executives are concerned about a lack of qualified workers (30%). The study’s authors discovered that, over three years, respondents repeatedly identified these topics as their top worries. Compliance with regulations (25%), natural calamities (21%), and technological obsolescence (17%) round out the top five.
Suggestions to Deal With Geopolitical Uncertainty
- Always be aware of what is happening worldwide and how it can affect your supply chain.
- Prepare for the worst if governments implement additional tariffs or trade restrictions.
- Keep your options open for where to buy goods to respond swiftly to changes in the global political climate and keep your business running.
- Use data analytics technologies like AI, ML, and robotics automation software platforms to make sense of complicated data sets like supplier risk ratings or inventory management information systems, allowing for more effective supply chain monitoring and management (IMIS).
- Make sure everyone on your team is aware of how important it is to be nimble and adaptable when it comes to handling the geopolitical risks of their respective responsibilities.
5. Severely Limited Availability Of Semiconductors
The lack of silicon is a key supply chain problem for the semiconductor industry. The growing need for chips is mostly attributable to the proliferation of artificial intelligence and internet-connected devices, leading to a current scarcity. Between 2019 and 2024, the semiconductor market is predicted to expand at a compound annual growth rate of 4.7%.
Chipmakers always look for solutions, such as novel materials and manufacturing techniques. However, they will still have difficulties in the next years because of the silicon shortage. Sub-industries within the semiconductor market include memory chips, microprocessors, analog ICs, and others (including sensors). The memory chips used in mobile phones and other devices that store data on flash drives or SD cards account for more than half of the revenue earned by this business sector.
Because of their widespread deployment in servers and personal computers, microprocessors are now an indispensable component of our daily lives, managing everything from traffic signals to climate control. Analog integrated circuits (ICs) are utilized in vehicles and industrial machinery to regulate features like brakes and the speedometer.
Suggestions to Deal With Semiconductor Shortages
- Adopting 5G Networks
- Keeping ahead of the competition with artificial intelligence
- Targeting emerging markets
6. Increased Use Of Anti-Competitive Tactics
There are many challenges that might have an impact on your company as a result of the growing complexity of global supply chains. Anti-competitive behavior is a major one which includes price fixing, unfair competition, and other similar schemes. Conflicts between local and international law and disparities in legal norms are hazards in today’s global economy.
There’s also the problem of following rules and legislation in every country. Awareness of the variations in compliance regulations across nations and how they could affect your business is essential. You should also be aware of the potential effects of unfair competition on your supply chain. This may involve activities such as piracy, copying, trademark infringement, theft of commercial secrets, and patent infringement.
Suggestions to Deal With Anti-Competitive Tactics
Make sure you’re constantly providing the lowest price possible by using a business intelligence tool to track your rivals’ pricing and market actions. The best way to guarantee repeat business is to provide excellent service and support to your consumers. To better serve customers in their time zone, you may use your own supply chain infrastructure by offering value-added solutions like inventory management, return processing, and order fulfillment.
Leverage cutting-edge tools, such as 3D printing and automation software, to enhance communication with vendors and boost productivity throughout the supply chain.
7. Natural Disasters and Extreme Weather
More and more supply networks are disrupted by extreme weather and natural catastrophes. 91% of supply chain managers report that severe weather has had a negative effect on their businesses. In addition, over half said they have been affected by a natural catastrophe in the last 12 months. In terms of frequency, the three most frequent effects were:
- Revenue lost as a result of a disruption in company operations
- Logistics issues that cause interruptions in the supply chain (e.g., trucking)
- Increased expenses in recovering supplies in the supply chain
Suggestions to Deal with Natural Disasters and Extreme Weather
External elements, such as harsh weather and natural catastrophes, are difficult to mitigate when developing methods to alleviate global supply chain challenges. Businesses need to take precautions in 2023 to ensure their supply chains can continue operating smoothly despite an increase in the frequency and severity of severe weather occurrences. Some possible approaches are listed below.
- Ensure your vendors have backup strategies in place to address the challenge of severe weather.
- Ensure you’re periodically evaluating your suppliers’ capacity to endure natural disasters.
- Be sure your business can survive these shocks without suffering major income loss (if possible).
Top-level executives and managers place a premium on resolving global supply chain difficulties. Supply chain management is a rapidly evolving aspect of the company that calls for creative approaches and problem-solving at every stage. Quest Consulting, a firm with extensive expertise in the field, offers seven tips for establishing a robust, globally-focused supply chain management system as we go toward 2022. This article discussed in depth the seven most pressing challenges facing the global supply chain in 2023 and methods for overcoming those challenges and ensuring your company’s success in the next year.
Cooperative Computing is a supply chain management expert that can help you identify problems and provide solutions. Connect with our experts today if you’re having trouble with your worldwide supply chain.