Post-COVID-19, every industry is facing challenges, but a sector that experienced unprecedented disruptions in operations is the supply chain. The pandemic highlighted the volatility in the market for logistics and brought forward some unique supply chain issues.
In 2023, supply chain issues will be customer-centric. According to Gartner, 62% of leading supply chain companies invest in solutions to improve customer experience rather than cost-cutting. You must know about emerging supply chain problems and solutions to these challenges in the industry.
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What are supply chain issues?
Supply chain issues refer to the challenges and disruptions in the smooth flow of goods and services from suppliers to consumers. These issues can result from various factors, and in recent years, complex factors have converged to create a perfect storm of challenges, causing supply chain issues on a global scale.
Let’s look at these challenges and their possible solutions.
What are the biggest global supply chain issues in 2023?
1. Increased Competition
During the pandemic, supply chain companies had an unpleasant awakening of how much they stand to lose if they are not expanding or utilizing the latest technologies.
Today, the race to expand in other markets and the availability of advanced technology is driving up the competition in the market. More players are in the market, forcing businesses to offer competitive pricing while improving the quality of their services and customer experience.
The heightened competition is one of the current supply chain issues that demand optimizing efficiency to meet the increased demand.
2. Higher consumer expectations
During the pandemic, the rise of next-day delivery services has introduced a behavior change in customers. When offline stores closed due to lockdown, hyper-delivery services became popular, and now, even after the pandemic, most customers expect fast delivery of their orders.
Not to mention free shipping is an attractive option. This is why businesses are challenged to manage the rising delivery cost without charging the customers to retain their loyalty and satisfaction.
3. Shortage of skilled workforce
The supply chain is labor-intensive, and the skilled workforce shortage remains challenging in 2023. A critical point of contention is the difference in demand for a younger workforce compared to an aging workforce. Younger workers expect a higher work-life balance.
Also, many potential workers don’t consider the supply chain lucrative. Companies need more skilled workers in critical areas such as supply chain management, logistics, and operations. The talent competition is high, and companies must focus on adopting technology to reduce the labor manual to attract talent.
4. Demand forecasting challenges
Unpredictable consumer behavior and changing marketplace dynamics make it more challenging to map demand forecasting. Such rapidly changing consumer preferences, shopping habits, and expectations significantly impact demand patterns and inventory management.
Businesses have a new supply chain issue to adapt to shifting consumer behavior and adjust their supply chains to meet these changes.
The increased digitization of supply chains in 2023 makes them susceptible to cyber threats such as data breaches and ransomware attacks. Cybersecurity is becoming one of the most essential aspects of supply chain management.
Businesses adopting technology to optimize their supply chain management operations should also focus on improving the security of the systems. Cybersecurity vulnerabilities can compromise sensitive information, disrupt operations, and lead to delays in production and distribution.
6. Climate change
Climate change is a significant challenge for supply chain management. From being the hottest year ever recorded to extreme climatic disasters, 2023 is a difficult year. Extreme weather events such as rising sea levels and natural disasters have introduced new supply chain challenges as disruption of transportation routes, infrastructure damage, and impact on production facilities are causing delays and interruptions in the flow of goods.
7. Environmental sustainability
The climatic disasters in 2023 highlighted the requirement for environmental sustainability in every industry. As the supply chain industry is constantly scrutinized for its carbon footprint and how it impacts the environment, changing regulatory requirements can profoundly impact global supply chains.
One of the issues in supply chain management for businesses is effectively adopting eco-friendly practices, reducing carbon footprints, and adhering to stringent environmental standards. These changes require supply chain companies to make significant operational changes with high-cost implications.
8. Increasing costs and material scarcity
The supply chain requires a lot of raw materials and resources. The environmental concerns, geopolitical tensions, and trade disruptions in 2023 are causing severe fluctuations in commodity prices and a shortage of raw materials. Increasing operational cost is causing global supply chain issues, further worsening due to inflation.
Businesses need help with increased production costs, which also affects product availability. The inability to secure affordable and reliable sources of essential materials is one of the supply chain bottlenecks that require attention.
9. Transparency and traceability
For many years, regulators and consumers have wanted transparency to know about the origin of products, ensure ethical sourcing and traceability of environmental impact. Transparency and traceability remain the current supply chain issues; to meet these requirements while maintaining a competitive edge, companies must invest in technology solutions that enable end-to-end visibility and real-time traceability in the supply chains.
10. Costing and budgeting
Rising inflation, geopolitical changes, and rising competition continuously increase operating costs for supply chain companies. Increasing fuel and energy prices and strict regulations around environmental regulations are raising input costs for companies. However, customers expect faster delivery at a lower cost, decreasing company revenue. This is a dual challenge that logistics companies need to face in 2023.
The impact of geopolitical factors on the current state of global supply chains
Supply chain issues in 2023 are compounded by unprecedented geopolitical uncertainty. According to SAP, most retailers hold political uncertainty as one of the main reasons for current supply chain issues.
The Russia-Ukraine conflict has a profound impact on the global supply chains. As one of the leading suppliers of gas and petroleum, Russia has a high impact on global energy prices. Due to the conflict with Ukraine, Russia faces sanctions from several countries, resulting in high energy and fuel costs.
Also, restricting air freight transportation across Europe and Asia due to the closing of Russian air space has caused increased traffic in northern European ports. Also, the disruptions to rail freight between China and Europe have affected the movement of products.
Also, the strained US-China relationship over China’s aggressive approach towards Taiwan threatens global supply chains, as China accounts for about 30% of global manufacturing output.
Possible solutions to resolve supply chain issues
1. Embrace innovation
Technology has always helped businesses overcome challenges. In 2023, companies need to further their investment in modern technology to mitigate the risks of supply chain issues. Integrating technological innovations like artificial intelligence (AI), the Internet of Things (IoT), and blockchain into supply chain management can profoundly affect supply chain visibility and efficiency.
AI-powered analytics can significantly assist with real-time insights to forecast demand patterns and help optimize inventory levels. IoT solutions can track goods in transit, monitor conditions, and predict maintenance needs. Blockchain technology is trusted for traceability and transparency in supply chain operations.
Furthermore, Truein can be instrumental in supply chain workforce management. Its AI-powered attendance management and workforce attendance tracking can help managers improve schedules, enhance productivity, and reduce labor costs. Truein can be deployed through smartphones as a hardware-less solution, making it a highly cost-effective solution for logistics workforce management.
2. Hold more inventory and diversify product sources
One effective way to tackle the supply chain crisis is to keep extra inventory. Businesses now hold more inventory than before because it makes it easier to meet customer needs.
You have to research and find what’s the right stock for you. You want to stay within your budget, as it will increase storage costs. Data forecasting can help to predict the demand, and you can hold more inventory accordingly.
Also, you cannot rely on a few product sources. As supply chain issues can cause disruption anytime, you need to have alternative sources to ensure a consistent flow of products to meet the market demand.
3. Improve demand forecasting
Demand forecasting is an excellent solution to solve the challenges of supply chain management. Supply chain companies and businesses can estimate demand by leveraging advanced analytics and data-driven forecasting models.
You should use historical data, market trends, and external factors to analyze the demand behavior in your market and make informed decisions about production, inventory levels, and resource allocation.
4. Work on return rates
Product returns have a significant on the supply chain. Customers want their product returns handled as efficiently as product delivery. This is why reverse logistics processes are crucial. To maximize returned goods’ value, businesses must implement clear return policies and streamline return processes. Furthermore, assess returned items to ensure you can reduce product returns and the associated costs.
5. Digitize supply chains
Digitization of supply chain processes is a reliable solution for delivery and operational costs issues. By implementing end-to-end digital solutions, businesses can enhance visibility, communication, and collaboration among supply chain partners.
Modern supply chain management digital platforms enable real-time tracking, data sharing, and rapid response to changes, helping to streamline operations and reduce manual errors.
The supply chain issues today are multi-faceted and require an integrated approach combining technological innovation, strategic diversification, and adaptive planning. The top 10 supply chain problems listed here will persist in 2023 and beyond. Businesses need to embrace innovation, analytics, and software solutions to navigate the challenges of supply chain management and ensure resilience in the face of uncertainties.
1. How did the supply chain issues start?
There is no one factor for the supply chain shortages businesses face today. These issues can be attributed to geopolitical tensions, globalization, increased competition, and changing consumer behaviors.
2. Will the supply chain improve in 2023?
The challenges mentioned will persist in 2023, and the improvements will depend on how effectively strategies to enhance resilience, agility, and collaboration are implemented.
3. What is the supply chain strategy for 2023?
The supply chain strategy for 2023 must involve diversifying sourcing, embracing digital innovations, utilizing forecasting, and building flexibility to navigate various disruptions and uncertainties.