These 5 Supply Chain Risks Will Decide The Fate Of Global Logistics In 2023

The year 2022 was less turbulent for supply chains in comparison to 2021. However, there is still time before we can claim that complete normalcy has returned. Geopolitical events like the Russia-Ukraine crisis and other unforeseen events continue to disrupt the global supply chain network. These risks remain unavoidable and supply chain leaders are not at peace with this fact. Businesses globally face the monumental task of mitigating emerging supply chain risks that affect the efficiency of their operations.

Supply Chain Risk Management And Its Increasing Importance

A fully functional supply chain is critical to fulfilling customer orders and keeping the business processes intact. From the sourcing of raw materials to delivering the finished goods to end customers, a supply chain encompasses multiple processes. The involvement of so many processes entails the involvement of multiple stakeholders at different levels. This makes supply chains prone to logistical errors. These emerging challenges and the risks associated with supply chain management demand serious attention from decision-makers.

The size of the global supply chain management market was $15.58 Billion in 2020. According to Statista, it is estimated to grow to $30.91 Billion by 2026. As disruptions in the global supply chain become more frequent, business leaders realize the need to invest in efficient supply chain management systems. In order to devise a suitable supply chain management strategy, you must be aware of the risks associated with the industry. Here are five major risks that could dictate the performance of your supply chain in 2023:

1.Rising Inflation: Inflation has to be one of the biggest supply chain risks that businesses need to tackle in 2023. As the global economy opened up nearly 12 months after the pandemic-induced economic crisis, prolonged inflation could reverse the recovery, pushing back consumer activities again. Major global economies like the US and Canada have 7%+ inflation rates. The condition is even worse in the UK with inflation reaching over 11%. Countries that lie along important trade routes, like Turkey, are battling inflation exceeding 80%. The rising inflation already shows a visible impact on energy, labor, and transport costs. One way businesses might want to tackle this is by increasing production costs. But increased customer costs may reverse the progress made in customer retention. There is a dire need for effective strategies to tackle rising inflation.

2. Shortage of Labor: Labor shortage has been a persistent problem since the beginning of the COVID-19 pandemic. The problem of labor shortage is largely attributed to external challenges like political instability (e.g. in Sri Lanka), geopolitical crisis (Russia-Ukraine crisis), COVID-19 pandemic, and migration of population due to certain reasons. As searching required labor becomes a challenge, labor costs are bound to increase with other supply chain risks like inflation contributing to the crisis. Supply chain leaders must act swiftly to get ahead of the problem at the earliest.

3. Absence Of Sustainable Practices: Meeting the COP26 targets is a major goal for many governments and organizations. More importantly, consumers are becoming increasingly aware of the shopping choices they make, with sustainability being a critical factor. Nearly 80% of US consumers take sustainability into account when making a purchase. Retailers are equally concerned about sustainable practices. For businesses that lack sustainable practices, it could be an uphill task to maintain the customer satisfaction rate while working on expansion. Even if a business aims to adopt more sustainable practices, the transition will be time-consuming. How well a business deals with this supply chain risk could decide its performance in 2023 and beyond.

4. Port Congestion: Port congestion is among the persistent supply chain risks that have continued to trouble businesses globally. Major ports across the globe continue to witness massive clogging. This has already been leading to delivery delays which is detrimental to customer retention. Congestion of ports is a global problem and major port operators must collaborate closely with transporters and businesses to find a way out. It is one of the long-term supply chain risks that may haunt businesses for the coming years if not dealt with on priority.

5. Resurgence of COVID-19: As we talk, China, one of the major global manufacturing hubs, is witnessing over 9,000 deaths per day due to COVID-19. While any other country is yet to report a new wave, we all are witnesses to how the outbreak happened during the last two years. A repeat of a similar series of events could be disastrous for the global supply chain, to say the least. However, unlike the last time, businesses should start preparing and planning for disruption right now. The clock is ticking. Any further delay could jeopardize all the gains made over the last 12 months.

Final Word Geopolitical events, natural disasters, trade embargos, and political disruptions are the biggest causes of emerging supply chain risks globally. As the supply chain industry embarks on the path of digital transformation, a seamless transition from legacy systems to advanced technologies is going to be a major challenge, adding to the emerging supply chain risks. Modern businesses must revisit their strategies to make effective supply chain management plans for the post-p
andemic era. The adoption of technologies like blockchain and IoT is going to be at the core of these plans. Businesses with agile supply chain management systems are going to have an upper hand in 2023 and beyond.