Supply chain predictions for 2023 provide investors with insights into various industries.
The following evidence-based predictions could give investors an upper hand in handling the current market. There currently is a high level of inventory on hand, unlike what occurred in the early months of the pandemic when COVID-19 lockdowns led to supply chain snags.
Now, there is volatility in inventory levels and the percentage of capacity used, which also is known as operating rates, because demand has not been properly forecast. Continue reading to explore the supply chain predictions for 2023.
Supply Chain Predictions: Procurement
There will be continued volatility on foreign exchange, tariffs, inventory levels and the percentage of capacity used. This situation will trigger different behaviors between markets in various parts of the world.
For example, the evolution of sea freight rates from Europe to Asia, against those from Europe to North America. This means that competition between supply chains will remain very strong, and the flexibility of sourcing and data leverage will remain an important competitive advantage.
The tightening of regulations has been going on for some time now, especially in Europe, on sustainability and human rights. It is expected that there will be increased focus on managing the recurring costs of transformation to comply with these regulations.
Finally, finding new ways to harness insights and analytics will continue to make the difference on efficiency, as well as demand forecasting.
Furthermore, the job market remains tight and chief procurement officers (CPOs) will face a war for procurement talent and expertise. Maximizing value from indirect spending requires a level of market knowledge that will be at a premium, meaning companies may need to contract for this expertise. However, these skills are scarce.
Therefore, finding new ways to harness insights and analytics will continue to make the difference on efficiency, long-term cost savings and demand forecasting.
Supply Chain Predictions: Logistics
The biggest focus for logistics companies in 2023 will be driving efficiencies to reduce output costs as demand continues to decline.
There will be a significant amount of revenue chasing because of the global economic output as clients seek to drive down costs. Therefore, automations will be top of mind next year. However, long lead times due to availability and initial start-up costs will likely slow the implementation of these new technologies.
Inflation, fears of recession, labor shortages and high fuel prices are the largest pressures facing logistics companies headed into 2023.
As interest rates continue to increase, we might see pressure on capital expenditure in the logistics market. A drop in spending is likely, as the cost of borrowing increases.
However, ceasing to invest in such projects could have detrimental effects, as expenditure and labor shortages will continue to plague the industry. The competitors that do invest will get a head start on their automation processes.
In addition, on-time performance will become a focal point in 2023 over cost and capacity, which have dominated the headlines for the past two years.
With softened pricing and increased available capacity likely to stay through 2023, on-time delivery will be critical. This means delivering high-end service will be top of the priority lists for many logistics companies.
Meanwhile, technology spending will decrease at the start of 2023 as there will be a lot more pressure on delivery as many industries are suffering from high levels of inventory. However looking long-term, technology spending will still be critical to create a competitive advantage and improve efficiency.
Next, there will be a consolidation in service providers across trucking and freight forwarding. These consolidations will allow cost cutting to meet current operating rates. Understanding risk and who they are partnered with will be critical for shippers.
Moreover, U.S. warehouse development starts will drop by a staggering 60% compared to 2022. This is driven by a rapid rise in the cost of capital, current excess capacity and need for emphasis on technology development and funding.
Overall, it will be a complicated market moving forward, and supply chains/logistics will have to continue to adapt to challenging circumstances.
Supply Chain Predictions: Technology
As workforce shortages show no sign of easing, the industry will see an uptick in leveraging automation and data lineage to combat the labor gap and to build a reliable supply chain.
With this progression, material-flow management will transform, as more companies adopt autonomous mobile robots (AMRs) that can adapt to changes in the warehouse environment and shifting process patterns.
It is also likely to see organizations home-in on efforts to build flexible, dynamic operations. One area is likely to be a focus on real-time data processing and analytics capabilities in warehousing. Supply chain operational strategies will propel organizations’ digitization ambitions forwards.
Supply Chain Predictions: Sustainability
Sustainable logistics is set to be a priority for organizations not only from an environmental perspective, but also in a bid to fuel improved economic sustainability.
Technology and data lineage will take the center stage of these initiatives, driving greener, more productive warehousing by digitizing paper processes, as well as promoting more effective materials-handling equipment.
Plus, as the transition to a circular economy becomes increasingly important, reverse flows will be set up to collect packaging, used products and parts, as well as to improve the returns process.
Furthermore, demand for sustainable warehouses will grow rapidly. Installed warehouse rooftop solar capacity will double, and electric vehicle (EV) truck charging capacity will exceed 10 megawatts.
Building future-proof facilities can shield logistics companies from future operational risks, including changing regulations, community resistance and volatile fossil fuel-based energy pricing.
Costs for sustainable building and operations are dropping. Government incentive programs and the European energy crisis have the power to fast track these longer-term trends.
Supply Chain Predictions: The Bottom Line
Although current supply chain challenges and volatility can make predictions difficult, making educated assumptions is critical for investors to turn a profit. The predictions made above across the procurement, logistics, technology and sustainability realms provide great insight as to how to navigate investing through the lens of supply chain.
Adam Johnson writes for www.stockinvestor.com.