Blog Month: December 2022

Introduction

The past few years have been chaotic and disruptive to the supply chain. It’s easy to tie everything back to COVID-19, but the reality tells a different story of continuous and cross-global disruption. Yes, COVID caused many issues, but other factors, including geopolitical changes, the war in Ukraine, weather events, peak season, and economic instability, have altered the fabric of logistics. With so much disruption fresh in mind, looking toward 2023 feels a bit more stable for every warehouse and distribution channel. However, the instability around the risk of recession remains, and knowing the top supply chain trends to watch in 2023 will help your organization prioritize operations and succeed. 

1. Carriers Will Lower Rates But Keep Many Others

Carrier rates are declining across the board, and Seatrade Maritime News reported an “expected trough of freight rates to mid-2023 from 2024 with a lower demand forecast and a higher than expected effective capacity increase due to the unwinding of congestion. Sector profitability is set to hit bottom in second half 2023.” Additional predictions for rate decline have ranged from 51 to 80% (Hand). 

The decline in container rates will precipitate further declines across other transportation modes and in all geographies. Still, accessorials may remain as they aren’t subject to the same lowering of typical per-mile costs (Flat World Global Solutions).

For instance, the continued push for higher wages means that time is of the essence, and delays on a loading dock still amount to lost time and wasted resources. As a result, carriers may apply additional accessorials to compensate for the bottoming of rates in tandem with rising labor costs. 

2. Cost Control Will Be Even More Important

The cost control issue isn’t isolated to those in a warehouse or distribution company. According to SAP, a 58% decrease in revenue has contributed to additional financing and missed payments across the supply chain. US-based consumers evaluate pricing on every purchase, including considering the shipping costs associated with e-commerce. Warehouse and distribution managers and procurement professionals will need to start thinking about managing the customer experience better. 

For international customers, the challenges of e-commerce are also making it troublesome to track landed costs and make the most of existing operations. The VAT tax and duties in the EU and Canada will pressure retailers to increase the visibility of operations and expenses. 

3. Cross Global Visibility & Data Will Remain Critical

The issue of visibility is paramount in every facet of the supply chain, and in 2023, visibility and data will be integral to all improvements. They will also rise in demand in tandem with advanced technologies, including drones, AI, and robotics, as well as robotics process automation (RPA) tools. 

The use of technology can help shippers and carriers mitigate rising costs, and to that point, many organizations have pursued additional means of digital transformation. For instance, 80% of respondents in a Forrester Consulting study conducted on behalf of KPMG, found that digital transformation is the most critical priority for organizations (KPMG Australia). Of course, any plan for improved visibility must coincide with a renewed focus on cybersecurity. 

4. Cybersecurity Risk Management Will Grow More Important in Omnichannel E-Commerce

Cybersecurity risks are a prevalent fact in today’s supply chain. According to Check Point, “global attacks increased by 28% in the third quarter of 2022 compared to the same period in 2021. The average weekly attacks per organization worldwide reached over 1,130” (Check Point Research). And while the healthcare and education industries may most commonly suffer an attack, the supply chain is still at risk. After all, even healthcare and education have arms in the omnichannel e-commerce landscape, and each purchase around these industries ties back to the supply chain. 

As a result, companies are actively investing in cybersecurity measures. Those investments will grow as more companies seek to embrace digital transformation fully and apply technology to do more with less. 

5. Alternative Fulfillment Strategies Will Be Key

COVID taught supply chain professionals that nothing is certain. The effects of the COVID-19 pandemic will continue to drive cross-global change within the logistics industry, asserts Shopify (Keenan and Moore). 

The pandemic revealed that the world could and does change even with lean inventory management practices in play and a strategy for every scenario. In response, today’s supply chains have fought to introduce new and alternate fulfillment models, such as hub injection, zone-skipping, and dropshipping, to reduce costs and avoid risks. Further, shippers might consider revamping existing omnichannel e-commerce capabilities to account for these changes in cost. For instance, it might be time to consider Shopify plus B2B features or define other distribution partners. 

6. The Last Mile Will Become a Focal Point for Improvements

While alternate fulfillment forms a basis for improvements, the last mile will continue to become more critical in the supply chain throughout 2023. The last mile is where the actual interaction with the customer occurs. It’s also the riskiest and most costly part of transportation, and there is more handling and more opportunity for things to go wrong. Supply chains will look for ways to increase transparency, such as tracking goods in the last mile and providing more insight into those problems to keep everyone in the loop. 

7. Geopolitics Will Still Be at Play

Geopolitics is the most wide-reaching of impacts that will affect the supply chain in 2023. The following year of development will be subjected to additional scrutiny and demands from governments around the globe. According to Forbes, Biden’s actions in late 2022 have triggered an ongoing cross-global challenge with how manufacturers operate with companies in China, saying “trade barriers are apt to increase” (Banker). Meanwhile, the war in Ukraine will undermine efficiency and worsen the semiconductor shortage due to the country’s role in producing neon gas—a precursory ingredient in manufacturing semiconductor chips. In turn, the supply chain will need to grow more agile and look for sourcing raw materials from other countries and regions. And it’s not isolated to neon; it could affect any commodity or material needed to maintain operations. 

Align Your Organization With These Supply Chain Trends by Partnering With ModusLink 

The supply chain trends of 2023 will center around the changing, cross-global landscape. Shippers, carriers, and other supply chain parties around the globe need to start thinking about how they can improve their organization and align operations with these trends now. Fortunately, ModusLink can help your organization achieve those goals. Connect with a ModusLink expert to get started today. 

Bibliography:

Banker, Steve. Top Supply Chain Trends Heading Into 2023. 2 November 2022. 24 11 2022. <https://www.forbes.com/sites/stevebanker/2022/11/02/top-supply-chain-trends-heading-into-2023/?sh=2ea26e6e55e2>.

Check Point Research. Check Point Research: Third quarter of 2022 reveals an increase in cyberattacks and unexpected developments in global trends. n.d. 30 November 2022. <https://blog.checkpoint.com/2022/10/26/third-quarter-of-2022-reveals-increase-in-cyberattacks/

Flat World Global Solutions. 2023 Supply Chain Trends: What You Should Know. 19 September 2022. 28 November 2022. <https://flatworldgs.com/2023-supply-chain-trends/>.

Hand, Marcus. Container shipping to hit bottom in mid-2023, forecasts HSBC. 12 October 2022. 30 November 2022. <https://www.seatrade-maritime.com/containers/container-shipping-hit-bottom-mid-2023-forecasts-hsbc>.

Keenan, Michael, and Kaleigh Moore. Supply Chain Trends That Will Shape 2023. 21 October 2022. 20 November 2022. <https://www.shopify.com/enterprise/supply-chain-trends-strategies>.

KPMG Australia. Future of Supply Chain: The road to everywhere. February 2022. 30 November 2022. <https://assets.kpmg/content/dam/kpmg/au/pdf/2022/future-of-supply-chain-road-to-everywhere.pdf>.

SAP News. New Research Forecasts the State of U.S. Supply Chains in 2023. 24 October 2022. 25 11 2022. <https://news.sap.com/2022/10/us-supply-chains-in-2023-new-research-forecast/>.