Supply chain managers have faced their fair share of challenges in 2022. These issues, several of which stretch back to the COVID-19 pandemic’s onset in 2020, have caused widespread disruption, and many are far from over. Current trends suggest 2023 could be an equally challenging year.
Some issues seem to be resolving, but others will linger and more may emerge. Prudent supply chain managers have learned that preparedness is key for dealing with these obstacles, so here are seven challenges to expect in 2023.
Continued Backlogs
One of the most prevalent challenges facing supply chains today will continue into next year. Backlogs from supply shortages and congested ports, an unfortunately persistent leftover from the early days of COVID, will still be an issue.
In October 2021, 45% of surveyed economists believed supply chain bottlenecks would mostly recede by mid-2022, with another 40% believing it would happen earlier. Seeing how these issues have yet to resolve in many areas, it’s safe to assume they’ll persist for a while. Supply chain managers must plan around continued backlogs.
Businesses must be careful to avoid over-ordering to compensate for these backlogs. Caving to demand too quickly could worsen the situation, continuing the bullwhip effect. Instead, supply chains should focus on slow, long-term recovery, restructuring to prevent similar shortages in the future.
Worker Shortages
Another challenge that will carry over from today is the ongoing labor shortage. Despite being one of the most essential jobs in the world, trucking has struggled to gain enough workers to maintain demand. Warehouse operations and manufacturing facilities face similar issues.
Much of the current labor shortage arises from a cultural shift, which takes time to settle. The available workforce must gain a better perception of supply chain work, and organizations must establish themselves as better, more equitable employers. These changes are important, but they won’t happen overnight.
In the meantime, supply chain organizations may have to rely more heavily on automation and outsourcing. These temporary fixes shouldn’t distract companies from longer-term cultural changes, but they can help alleviate the issue.
Growing Cyberthreats
Supply chain managers must also address the growing cybercrime problem. This issue has been building as supply chains have implemented more digital technologies, with attacks increasing by 51% in the last half of 2021. This trend will continue as more companies use technologies like Internet of Things (IoT) devices.
Incidents like the SolarWinds hack highlight how destructive supply chain cyberattacks can be. Given this potential and the industry’s lack of experience with cybersecurity, hackers will likely target supply chains with increasing frequency.
Supply chain managers must take cybersecurity more seriously heading into 2023. That likely means purchasing more security software, training employees and possibly appointing dedicated information security officers. New technologies can provide a crucial edge, but only if businesses secure them first.
Globalization Challenges
Managing international relationships will likely be another prominent challenge for supply chain managers. Many supply chains are becoming more distributed, with 55% dual sourcing raw materials and 23% expanding backup production sites. This can improve resiliency, but companies may face some obstacles in this initiative.
Increasing tensions with China and the ongoing Ukraine-Russia conflict are making international business increasingly difficult. As every nation takes steps toward post-COVID recovery, supply chain managers may face limited options for expansion, higher fees or similar roadblocks.
At the same time, some supply chain managers are trying to reshore or near-shore operations. This could hamper relations with other countries or lead to delays from regional infrastructure struggling to keep up. Globalization and regional changes as a whole will require more strategy and forethought in 2023.
Extreme Weather
Extreme weather is another easily overlooked but equally important supply chain challenge. This has always been a factor, but 71% of extreme events have become more likely due to climate change. Consequently, supply chain managers can expect more weather-related challenges in 2023.
Already, nearly 6 million car crashes occur annually because of extreme weather conditions, posing dangers and delays to truck drivers. Large storms or events like earthquakes could impact other parts of the supply chain, too. Factories, warehouses and distribution centers, especially in coastal areas, may see increasing weather-related disruptions.
Supply chain managers can’t control the weather, but they can adapt to it. Building more resiliency into operations and moving mission-critical centers away from storm-prone areas could prove useful.
Pressure to Go Green
Relatedly, supply chains will also face increasing pressure to become more sustainable in 2023. Eco-friendliness is already an increasingly important buying decision for consumers, and as it grows, attention will turn to supply chain companies.
Scope 3 emissions, which come from outside sources like supply chain partners, often represent the majority of pollution in an organization. Consequently, as consumer pressure to go green increases, B2C companies will look for greener B2B partners to ensure their entire value chain is sustainable.
Sustainability is an important goal, but achieving it will be a challenge. Supply chain managers must start looking for areas to become more eco-friendly today to enable larger changes in the future. That could entail powering warehouses with renewable energy, using electric vehicles for last-mile deliveries or taking similar actions.
Changing Legislation
Supply chain managers in 2023 may also have to navigate changing regulatory and legal landscapes. Supply chains have garnered more attention from government bodies as stock shortages and delays have grown. Because 2022 is an election year, 2023 is also ripe for legal change.
What may change is uncertain, and many potential developments could benefit supply chain organizations. However, any significant change involves disruption, whether the results are ultimately positive or not. Supply chain managers must keep a close eye on legal developments to see how they may have to adjust.
Legal shifts have already begun. The Ocean Shipping and Reform Act of 2022 became law on June 16 and will regulate ocean carriers more closely. Similar acts may address other parts of the supply chain in the future.
Supply Chain Managers Face a Challenging Road Ahead
Managing a supply chain is complicated work, regardless of the year. Supply chain organizations are no strangers to challenges, but they must understand that these obstacles are far from over. Businesses hoping to avoid similar crises in the future must anticipate and adapt to incoming hazards.
These seven challenges will likely drive supply chain changes in 2023. Understanding and preparing for them ahead of time will enable more effective responses, preventing wide-scale disruption.
