A year of cautious optimism for supply chain operations

After three years of unprecedented disruptions, 2023 will bring ‘cautious optimism’ for supply chain operations, says David Oldridge, Managing Partner at BPS Global Australia.

The challenges of the past few years are far from over for all supply chains. It has been a turbulent time for the sector as we navigate the choppy waters brought about by Covid-19; and the effects of the pandemic are still being felt by many supply chain operators.

Almost without exception, from FMCG, Automotive, and Technology to Fashion, we see massive overstocking in every sector – a direct result of supply chain uncertainty, one of the results of the pandemic pressure cookers.

Away from Covid-19, the challenges remain unrelenting – the rising cost of living and continued geopolitical unrest has rippled into 2023. However, thanks to the last few years of chaos and uncertainty, I am confident the global supply is better prepared than ever to weather the storm and to spring back from the gyrations of the compounding bullwhip effects of the past few years.

Our supply chains are subject to varied and unpredictable challenges and issues, and 2023 will be no different. From inflation to a looming recession; geopolitical challenges to mass labour shortages; and rapidly increasing industrial property rates to increasing pressures from government and consumers to become a more sustainable sector – supply chain leaders are bracing for a year full of forward-thinking and ever-evolving strategies.

The good news

The Australian economy bounced back towards the end of last year. Figures released by the Australian Bureau of Statistics (ABS) showed that, despite the rising costs of living, household spending drove GDP growth. The September quarter was the fourth consecutive quarter of economic growth, following a contraction in the same period in 2021.

However, the University of Sydney Business School academics are warning that even though we have made an incredible recovery after Covid-19, rising interest rates and the ongoing threat of inflation make the outlook for next year one of pragmatic caution for businesses.

Related: Gartner: Four ways chief supply chain officers can respond to inflation

For suppliers who can meet today’s challenges, there is positive news on the horizon and reasons to be optimistic about the future. Sure, the short-term outlook remains uncertain,but economic challenges will likely abate sometime in 2023. According to the IMF, inflation is expected to fall to 4.1% by 2024, and e-commerce is expected to grow at a healthy pace for many years to come. It is likely that we will see interest rates peak and supply chain constraints reduce – the timing and form of China’s reopening will also be a key driver for the Australian market.

Agile, flexible, visible

In 2023, those companies that invest in the right technologies will give their supply chain operations a competitive edge and better position themselves for long-term success. Supply chain leaders must build agility and visibility into their operations and strategies – along with faster and more accurate planning. A recent report from Gartner suggests that this year, more companies must ensure their fulfilment offerings are as cost-effective as possible by leveraging the latest technologies available in leading delivery management solutions.

Supply chain management trends will continue to change rapidly. In order to keep up with the pace of change, our need to attract and retain the right people with innovative mindsets is going to be essential to successful technology implementation in 2023.

This should be the year we prioritise filling our sector’s skills gaps and labour shortages. As we battle against high turnover rates and low unemployment, not only will automation help by making jobs safer, more productive and less physically and mentally taxing, but also by attracting a new generation of tech-savvy supply chain experts to the fold.

Lessons learnt

In the wake of the pandemic, many lessons have been learned already; and 2023 will be the year that showcases the importance of resilient and flexible supply chains. The Covid-19 pandemic exposed profound weaknesses in both global and domestic supply chain operations, and laid bare many Australian vulnerabilities as an island nation, with 98% of trade and most jobs connected to, or reliant on, sea freight in some way.

Short and long-term, it seems inevitable that supply chains will be different. As countries begin to emerge from their pandemic pressure cookers, businesses are contemplating those lessons and beginning to consider exactly how their supply chain will differ between yesterday and tomorrow.

Healing supply chain pain

We have all experienced our share of supply chain pain over the last few years and global supply chain analysts suggest there will be little relief from disruption in 2023. However, the industry is changing at breakneck speed and this new year holds a lot of promise. Businesses are set to recover from the setbacks of the past two years gradually and are poised to invest in creating and reimaging more sustainable and innovative supply chains that are fit for the future.

As old challenges fade, new ones will take their place. The successful supply chain of 2023 will embrace technology, be aware of the geopolitical climate and any issues arising, be fully focussed on sustainability and attract and utilise the finest talent available.