With how many hits the global and local supply chains have taken these last few years, it is only reasonable to fear what 2023 has in store for us. Well, let’s take a look at the critical supply chain risks to look out for in 2023 to see how bad things might get and what could be done to deal with the problems.
The potential return of COVID
The first and one of the most critical supply chain risks to look out for in 2023 is, without a doubt, the potential resurgence of the COVID pandemic. Now, it is true that COVID never really stopped being an issue. However, the potential for a full-blown pandemic to repeat itself is not inconsiderable. This has many people involved in the logistics business understandably worried. The last pandemic had such adverse effects on the supply chain that it is still recovering. So, a repeat of the event would almost be guaranteed to set back at least some of the progress that’s been made toward improving the situation. Unfortunately, the only real response to this is trying to account for the effects of the pandemic ahead of time, which has very limited effectiveness and depends too much on hypotheticals.
Lack of skilled workers
That the lack of skilled workers is one of the critical supply chain risks to look out for in 2023 is not particularly new. And yet, it very much remains one of the most annoying risks to deal with. This is because it’s an indirect effect of the previous pandemic wave and has left businesses floundering to shore up their employee rosters. This scramble to compensate for the lack of skilled workers means that a lot of important strategies, such as some of the ways to cope with the capacity crunch, are untenable. Trying to operate in such a manner relying on untrained employees is asking for trouble. This means that employee training has become more important than ever. Yet, even that mitigates problems partly because a lot of employees receive the training provided only to ‘trade up’ in favor of bigger companies.
The threat of further inflation
Inflation, of course, remains a serious problem that’s more than just looming on the horizon. We are already living through its disastrous effects on the supply chain. But, the realistic chances of it growing worse are enough to alarm most business owners. The one thing to be thankful for is the opportunity to plan for it now. And you can do so by trying to strike up long-term contracts with suppliers. If you can secure a long-term contract, you can, through it, at least mitigate the effects of any sudden price spikes. Unfortunately, there is little to be done about what inflation means for operating costs. That they can get higher at any time spells trouble for smaller businesses without enough capital to play with.
Global port congestion and problems with ocean freight
Unfortunately, we also encountered the next on our list of critical supply chain risks to look out for in 2023: global port congestion. This, too, was a result of the previous pandemic and part of the reason why a new one is feared. The delays caused by various ports getting shut down or quarantined resulted in mass congestion of the waters. This then caused its own delays in turn. The cascade of events might repeat itself in 2023, even if the cause is not a pandemic. After all, the surge in interest in ocean freight due to its competitive prices compared to other transportation options means that an already strained infrastructure, especially in the US, might start struggling to handle the burden placed on it. It is also unreasonably hard to plan for this eventuality since most of the causes can’t be easily fixed.
The proper distribution of goods being slowed down can also lead to the following problem: a warehousing shortage. Due to the slowed consumption and lower demand due to climbing prices, we are seeing some of this. Warehouses are stuck with old stock. And business owners must either get rid of it quickly or look for more warehouse space. Of course, warehousing space being a limited commodity, it is very difficult to obtain. This has led to other solutions being put into effect, such as efforts to optimize distribution centers as a way of minimizing storage time and speeding up the turnover of goods. In turn, this is, ironically, making the demand for skilled employees we’ve already mentioned even higher.
With environmental concerns becoming a more pressing issue, governments throughout the world are trying to implement measures that will force businesses to comply. While generally a good thing, some of the projects, such as reducing emissions, have the potential to hit supply chains hard. With limited freedom to chart frequent shipments of goods, it would be difficult to revitalize the supply chain properly. In fact, some of the work that is already done might come undone. Thus worsening issues we’ve covered, such as congestion and warehousing shortages.
Difficulties with forecasting
The final of the critical supply chain risks to look out for in 2023 is the difficulty forecasting demand. With the instabilities of the supply chain and the instabilities the other risks can cause, it becomes increasingly hard to properly get ahead of demand or even properly understand it. This can easily cause losses and further damage the global supply chain. Even those who understand the supply chain well enough to stay on top of demand have something to fear, however. Namely, cost forecasting becomes a lot more difficult when inflation can cause spikes in prices, which means that your previously flawless budget might suddenly fall short of the strain placed on it.
Moving forward with the supply chain of 2023
From what we covered about the critical supply chain risks to look out for in 2023, it becomes clear that most of the risks are a result of external influence. So long as the economy and global health remain relatively stable, we can expect the supply chain to withstand the year relatively unscathed. The opposite, however, would nullify a lot of progress made since the pandemic to fix things.
Miles Gregory is a successful logistics business owner who works closely with Helix Move VA and knows how to avoid risks and maximize profits. He shares his advice and experiences freely through guest blogs.
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