What decisions are expected to shape the supply chain in 2023

Matt is the Founder and CEO of FourKites.

As we close out 2022, many players in the supply chain industry are offering their predictions for the year ahead. When it comes to forecasting, I confess to a certain apprehension. After all, the past few years have marked the most volatile and, in many ways, the most surprising period in the history of modern supply chains.

Yet it was also a time of rapid and positive transformation, as businesses around the world embraced new technologies and reinvented outdated practices to meet the challenges of the moment and position themselves for the future. I think we will continue to be surprised in 2023 as the transformation continues in new and exciting directions.

There will be no “return to normal”.

We haven’t seen such economic conditions in decades, if ever. Inflation is hovering around 8% and most American businesses are raising their prices accordingly. Yet even as the specter of recession looms large, holiday sales are strong and unemployment is relatively low, for now. But if the Fed continues to raise interest rates, which seems likely, unemployment should rise.

Ultimately, there can be no “back to normal” for our supply chains when the macroeconomic environment is so abnormal.

A prolonged period of lower capacity.

Freight rates that peaked during the many pandemic-related disruptions have plummeted, so much so that some are calling the situation a “freight recession.” Shippers and retailers will benefit from lower freight costs, but I fear the U.S. trucking industry will face an unusually long period – more than two years, by my estimate – of reduced capacity, margin pressures, intense competition and, inevitably, consolidation.

So what can we do about it? Look for shipping partners who can compete on more than cost. Maritime partners who drive continuous improvement initiatives, leverage technology to optimize performance, provide enhanced customer service, or offer solutions to improve sustainability initiatives are able to differentiate themselves from the competition. and to offer added value to their maritime partners.

Targeted investments in CX, inventory management.

In a relatively short period, companies experienced a shortage of inventory followed by an absolute glut. “Just in time” inventory management has been abandoned in favor of “just in case”. Going forward, companies will continue to rethink and invest in new inventory management strategies and technologies in an ongoing effort to build more resilient supply chains that keep inventory costs under control.

At the same time, as customers face rising prices across the board, organizations will try to build customer loyalty by prioritizing investments in better customer experiences.

At FourKites, we always say supply chain is a team sport, and that’s especially true for effective inventory management. To improve product flow and customer experiences, walk through the end-to-end process with front-line teams and identify any waste or ways to get products to shelves more efficiently. See this process as an opportunity to grow your supply chain team and empower them to help rank up where investments are needed.

A year of new supplier ecosystems.

A recent McKinsey survey of supply chain leaders shed light on just how much transformation has taken place in recent years. More than eight out of 10 respondents said they had dual sourcing strategies in place and nearly half were developing regional networks and outreach strategies.

These initiatives will continue to be ubiquitous in 2023, giving rise to whole new ecosystems of partners that will be more tightly integrated and collaborative, thanks to new technologies. (A side effect will be that some countries and regions will come out on top – Mexico, for example – while others will lose.)

Therefore, I would recommend doing all you can to bring your company’s products as close to your end customers as possible. Many companies are already doing this by creating heatmaps of order volumes and locations, and using network design to bring products closer to customers, resulting in faster turnaround times, fewer stockouts, and more. stock and better shelf availability.

The pressure to build sustainable supply chains will only increase, and that’s a good thing.

The pressure on companies to make real progress towards sustainable supply chains will only increase. The buying public wants to buy from companies that are driving meaningful change, and more and more investors are also putting increased pressure on company boards to demonstrate progress.

That’s a good thing, as is the fact that 80% of respondents to MIT’s 2022 State of the Supply Chain Report said the pandemic hasn’t slowed down their company’s sustainability efforts. There is simply too much to be gained, for everyone, when companies take concrete steps to reduce waste, reduce their carbon footprint and optimize operations, not just within their own organization, but across complex ecosystems. of the supply chain. I expect exciting progress to be made in 2023.

The IoT will come to the fore.

Given the continued decline in the cost of Internet of Things (IoT) devices, we will see an explosion in the use of IoT sensors in supply chains and in transportation logistics in particular. Businesses should be able to take advantage of powerful new features when it comes to monitoring the status, location and security of high-value goods, ranging from sensitive pharmaceuticals requiring strict temperature controls to perishables.

Don’t overlook the fact that new technologies often have the hidden benefit of happier employees. Investing in hardware and systems that support the ease and efficiency of capturing this information takes a lot of the expectations off your already hard-working team.

It’s important to note that the decisions and investments leaders make (or don’t make) in the next year will greatly influence their future. When McKinsey studied how 1,000 publicly traded companies fared before, during and after the 2008 recession, they found that the richest 20% pulled some levers that others didn’t, including an investment in growth. For supply chain leaders, growth can come by investing in the tools needed for better inventory management, a more efficient supplier ecosystem, improved sustainability, and a smarter global supply chain capable of capturing end-to-end data.

Conclusion

Whatever the year ahead, our supply chains are much more resilient today than they were just a few years ago. And I’m confident that when we look back to 2023, we’ll mark another year of tremendous progress.


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