What Supply Chain Executives Can Expect in 2023
Supply chain executives dealt with a variety of headaches over the past two years. Disruptions, delays, workarounds and all-out stoppages became all too familiar as COVID brought the fragility of the world’s supply chains into full view. Even consumers are now experts in supply chain woes. As 2022 draws to a close and 2023 waits just around the corner, what can supply chain executives expect from the coming year?
Unfortunately, challenges still lie on the road ahead. Disruption is still with us. Those headaches haven’t gone away. But, hang in there. We see reasons for optimism, too.
Supply chain trends for 2023
Here are some of the trends we’re seeing, and challenges supply chain executives will likely be experiencing in 2023.
Backlogs and logjams
Shortages and congestion at ports worldwide are expected to continue into 2023. If you didn’t see this coming, you’re not alone. In October 2021, economists said supply-chain bottlenecks would be the “biggest threat to growth” for the next 12 to 18 months, but predicted those bottlenecks would ease up during mid-2022, according to the Wall Street Journal.
That didn’t happen. Shortages will continue to make product more difficult to get. Similarly, port congestion remains an issue, but not due to the COVID restrictions that kept cargo ships floating in the harbor, unable to dock. With the exception of China and its zero-tolerance COVID policy, this time, the cause of that congestion will be the lack of trucks to take that cargo where it needs to go.
Lack of skilled workers
Speaking of the shortage of truck drivers … all industries are experiencing problems recruiting, hiring and retaining employees, and jobs all along the supply chain are no exception. Unemployment rates are at historic lows, but talk to any hiring manager and they’ll tell you they can’t get people in the door. The U.S. trucking industry estimates it is down some 60,000 drivers. Warehouses and manufacturing facilities are experiencing labor shortages, too, as a result of an aging workforce and high turnover rates. All of this directly impacts the supply chain, causing manufacturing and delivery delays and creating a ripple effect that extends all the way out to the end user.
Unsteady global relationships
The war in Ukraine doesn’t show any signs of resolving soon, and its impact on the supply chain will continue until the situation there improves. According to Consultancy.eu, the continued war will have an “impact on the costs of raw materials, energy, logistics and digital services.” The report further stated that oil and gas prices in Europe have skyrocketed, due to the high dependence on imports from Russia.
But the war in Ukraine isn’t the only geopolitical cause of disruption to the supply chain. China is continuing with its zero-tolerance COVID lockdowns. If you saw reports of the recent closure of Shanghai Disney, with thousands of guests trapped inside and unable to leave for days until they showed a negative COVID test, you’re aware of this ongoing situation in China. It will undoubtedly affect the manufacturing industry there, even potentially shutting down factories and ports.
Extreme weather events
Are you noticing that we seem to be having a “100-year flood” or the worst hurricane on record or extreme droughts and wildfires regularly? All of these can contribute to a situational supply chain backup, affecting not only manufacturers and truckers in areas that are hit by extreme weather, but those relying on that delayed supply down the line. Climate woes in the U.S. are also contributing to issues like historic low water levels. In October 2022, the water level was so low in the Mississippi River, it resulted in a jam of more than 2,000 barges carrying corn and soybeans.
There is a kind of chicken-and-egg scenario with inflation and supply chain disruption. Prices spiked because of supply chain disruption, helping to increase inflation, which in turn feeds price hikes … which in turn affect the supply chain. According to U.S. Bank, the cost of living in the U.S., as measured by the Consumer Price Index, rose by more than 9% from June 2021 to June 2022. The November 2022 rate hike by the Fed, the sixth this year, is intended to mitigate inflation in an effort to help solve the problem.
Bottom line: Hang in there
While these challenges persist, signs point to an easing in supply chain woes in 2023, especially in the area of port congestion. Sea-Intelligence reported in October 2022 that 50% of congestion issues have been or are being resolved. The report predicts the industry being back at “normal” capacity in early 2023. When the logistics industry can get product to where it needs to be on time, that’s half the battle.
At USC Consulting Group, we’ve been helping our clients up their efficiency, deal with supply chain disruption and create more profitable operations for more than 50 years. We’re here to help. Give us a call today.