2022 was a challenging year, and the fight is still ongoing. The reliability of the supply chain will face new challenges in 2023.
While many people might predict a decline in supply chain challenges, a more informed view is that the obstacles remain in a different form.
Here, we outline what to anticipate when growth slows in the face of the impending recession. The supply chain’s transition from 7-8% growth to a slower pace has its issues.
Covid and China
Companies reliant on Chinese manufacturers must prepare for severe supply disruptions and shortages. The effects of COVID will be far more severe than anticipated, peaking two to three weeks after Lunar New Year. The problem is that, although unknown, COVID levels are high, and the lunar New Year celebration will expedite the spread. Demand in China will decline as a result of death and disruption. Understanding how dependent your company is on China will help you take the next move and minimize risk.
Organizational Realignment and Adjustment
Expect businesses to prepare write-down stories for Q1 reporting that include inventory write-offs and employee layoffs in response to the slowing of growth. Consider managing your inventory seriously. The write-downs are a fantastic source of information about the organization’s failure to match supply and demand and redefine inventory management processes by learning lessons from the past.
Shifts in Demand
This crisis will severely impact the wealthy consumer more than in the past. To identify the trends and align the supply chain based on actual expenditure, use market data and model supply chain flow based on consumption. Avoid using conventional demand modelling practices that rely on previous shipments and orders.
As the Russian-Ukrainian conflict intensifies, a different type of discussion is driven by energy and petroleum-based industries. Manufacturing reliability is impacted by the rising cost of energy in Europe and impending power disruptions. Connecting to your suppliers through a strong supplier development organization is advisable.
Delays in Container Bookings
Forecasts indicate that 25–30% of containers will be delayed or rebooked on future ships due to the decline in demand; thus, expect a wide range of lead times. Create a master data layer for planning to inform the company regarding expected deliveries based on actual bookings. We will experience a change in lead times and be prepared for irregular and variable behaviour.