Once viewed as a black box where unknown magic occurred, the area of supply chain has been revealed, dominating news headlines as current events highlighted product disruptions and material shortages to consumers more than ever before. Still navigating mass pandemic-related disruptions, companies today are looking to better insulate their supply chains from risk and uncertainty. Currently, rising inflation and increasing fuel costs are placing further strain on organizations seeking to return to pre-pandemic service levels, margins, and inventory levels. As we look to 2023 and beyond, we predict a continued focus on the ways supply chains can continue to prepare for uncertainty and disruption while also supporting improved risk mitigation strategies, supportive technologies, and sustainable practices. Below, we outline four supply chain trends to assist with these areas in 2023.
2023 Supply Chain Trends
Trend #1: Reshoring and Risk Management
After years of increasing globalization, COVID-19 brought to bear the fragility of a sprawling global supply chain. The disruptions have shown companies that the inability to predict risks will affect their supply chain. In turn, organizations have begun examining, revising, and establishing a comprehensive supply chain risk mitigation strategy by which to operate moving forward.
Shortening supply chains through reshoring or near-shoring has been one leading supply chain risk management abatement approach. Reshoring is best viewed as bringing key parts, products, or processes from the supply chain, be it suppliers or manufacturing, back to the home country. Some additional benefits of reshoring include reduced shipment costs, shorter lead-times, greater availability of higher skilled labor, increased oversite to quality control, higher responsiveness to customers, intellectual property control, and improved total cost ownership.
During 2022, nearly 350,000 jobs were expected to be re-shored, a rate not seen since 2010, and the projections for 2023 to 2026 don’t show this trend declining. By 2025, reshoring could reduce shipments from Asia to the U.S. by 20% and by 40% by 2030. As such, the challenge today is focused on how to best prepare for the next request for restructuring, reshoring, or near-shoring the supply chain.
Restructuring a supply chain requires ensuring the supply chain is adequately mapped to include its high, medium, and minimal risk elements. These could be internal or external, such as a supplier’s raw material. The objective is to estimate the amount of time it will take to get back to operations if there is a disruption.
Going forward, we expect near-shoring and reshoring to continue as organizations seek to mitigate the challenges of an increasingly complex global supply chain.
Trend #2: Network Optimization as a Priority
After almost three years of shortages, the pendulum has swung in the other direction with many organizations sitting on excess inventory. Couple this ample inventory with rising transportation costs, and it becomes apparent why organizations are turning to network optimization. It has never been more critical to have the correct inventory in the correct, or at least close-to-correct, location. Optimizing your network can ensure that supply and demand of a given location are balanced, reduces transportation costs, and create a more agile supply chain. Of course, this isn’t a simple problem to solve.
As such, organizations seek network optimization tools to help identify cost savings and improved service. The market for tools to successfully optimize the supply chain network has continued to grow. The supply chain management software market is currently worth $5.7 billion and expected to hit $11.3 billion by 2026.
For 2023, as companies examine network optimization toolsets, there are key areas which should be considered: First, the cleanliness and accuracy of the organization’s data; and second, the current structure of its movement of goods, paying special attention to its inter- and intra- company supply chain ERP setup and design.
The value of a network optimization toolset is predicated on using many data elements. Therefore, it’s advisable to conduct a supply chain data and process assessment before beginning such a project. This will assist in developing the next steps, along with the likeness of success. No matter where you are in the process, it’s vital that your organization has a defined roadmap and plan to execute against in 2023. Continue reading by downloading the full report below.