While it is indisputable that supply chain logistics are in a perpetual state of flux, it is safe to say that the year 2020 introduced disruptions to which the majority of consumer product companies were not used. In order to thrive in the fiercely competitive e-commerce sector, businesses must now, in 2023, overcome new challenges.
However, a shift to online retail, an increase in customer confidence, unmet demand, and accumulated savings present a tremendous opportunity for digitally native businesses.
Supply Chain Problems in 2023
In the supply chain ecosystem, the COVID-19 pandemic continues to pose new, unanticipated challenges to both productivity and profitability. In 2023, the following supply chain concerns will be the most significant for product-based businesses worldwide.
1. Limited Access to
Since the beginning of the epidemic, insufficient inputs have been a source of worry due to the unprecedented surge in consumer demand. Even now, given the limited availability of many components and materials, merchants and suppliers have difficulties supplying this demand.
From furniture makers experiencing foam shortages to bike manufacturers losing payment terms as a result of component suppliers reaching capacity, we have heard from a number of growth-stage firms in our network about a wide range of issues.
In reality, a recent survey for Supply Chain Management revealed “record-long lead times, widespread shortages of crucial basic materials, rising commodity costs, and challenges transferring items across industries.”
The ability of a brand to retain growth despite these limited inputs is primarily dependent on working capital to get it through these sluggish periods and ramp up for peak seasons.
2. Increasing Freight Prices
Contrary to original forecasts, the pandemic has greatly increased the demand for container shipping. Global security measures have caused an increase in online sales, which has raised the demand for imported raw materials and finished consumer goods (a large percentage of which are moved in shipping containers).
And because this demand was so much greater than anticipated, there was a record-breaking lack of empty or available containers and insufficient shipping capacity to meet it.
As is typical, this scarcity has resulted in a significant price hike. In the past year alone, freight costs from China to the West Coast have grown by an astonishing 240%.
3. Obstacles in Demand Projection
In the midst of a global pandemic, demand forecasting has increased the bar for supply chain management in numerous organizations. For a vast number of retailers and producers of consumer goods/services, the commencement of COVID-19 essentially obliterated the predictions, rendering them unable to determine how much inventory to stock or produce at any one time.
Therefore, the difficulty has come from the need to frequently rely on intuition rather than data-driven research when seeking to improve client demand estimations. In this scenario, supply chain managers are asked to set aside their biases, seek out fresh data sets for forecast models, and continuously refine their findings for maximum precision.
4. Overcrowding of Ports
Given that port owners, carriers, and shippers are still searching for a sustainable solution to this problem, port congestion caused by the pandemic remains one of the most significant challenges for global supply chains. Congestion occurs when a ship lands at a port but is unable to load (or unload) its cargo because the station is already full.
Although the loading and unloading method normally proceeds as scheduled, workforce shortages and societal estrangement caused by the pandemic have significantly altered the process (creating major bottlenecks at a number of busy global docks).
Due to this congestion and the resulting backlog, numerous firms are unable to send their items on time, making it impossible for carriers to reach their promised delivery dates.
5. The Digital Transformation
Transformation to the digital realm and the Internet of Things can be a mixed blessing for supply chain operations. Nevertheless, a variety of technologies, such as artificial intelligence, drones and robots, electric vehicles, and on-demand delivery, have the potential to improve the conventional supply chain.
The issue lies in deploying these systems/services across an organization’s present supply chain activities, despite the fact that their long-term objective is to make eCommerce procedures more efficient and cost-effective.
The implementation of these technologies involves effort and organizational reconfiguration, especially when multiple warehouses or omnichannel sales are involved. However, supply networks must undergo ongoing modification in order to remain competitive.
6. Restructuring
There is little doubt that restructuring has a substantial impact on modern retail brands. This procedure may involve, among other options, relocating operations, switching suppliers, or negotiating contracts with all new carriers. Determining when a change is necessary and how to implement it as smoothly as possible is difficult when restructuring.
For instance, relocating suppliers must be meticulously planned to prevent inventory shortages during the transition. To avoid a stockout (and lost sales) in the event that demand increases while you are awaiting replenishment or contracts to be finalized, you will need to maintain a large amount of safety stock.
The same applies if your company is reshoring. You must ensure that you have sufficient stock on hand in the event that the transfer takes longer than anticipated.
7. Inflation
There is a good chance that 2023 will be known as the year of inflation, although it is too early to say with certainty. Despite the fact that the United States has been the subject of much inflation-related discussion, a number of other nations are currently experiencing the highest inflation levels in many years.
As this period of inflation continues, businesses must be prepared for cost increases associated with the acquisition of raw materials, finished goods, and more. As a result of these escalating costs, your product-based brand may experience excess or surplus inventory, rising storage costs, shrinking margins, and declining revenue.
In light of this, the difficulty is to acknowledge inflation as a reality while working to mitigate its effects. Understanding how inflation affects your specific business and taking measures to help you survive these challenging times are the first steps in combating it.
