As midnight struck and 2022 turned into 2023, we entered a fourth calendar year with a disrupted, unreliable supply chain. Optimism that the situation would be resolved last year was soon quashed, and while some progress was made, we’re all still enduring uncertainty in managing our supply chains and procuring the products we need.
So, will 2023 see a long-awaited return to normalcy, or does the forecast for the next 12 months indicate further challenges ahead?
Supply Shortages Continue
Lingering challenges around the world will prolong supply issues. The Russian invasion of Ukraine rumbles on with no end in sight, and we should expect commodities such as oil and metals to remain impacted. New COVID-19 variants are still being discovered, affecting workforces and limiting the capacity of critical elements of the supply chain in the process.
One development and cause of uncertainty is China’s ongoing battle with COVID-19. In early December, the Chinese government ended its zero-COVID policy, which had seen entire cities immediately locked down whenever a case was confirmed. Some of the lockdowns took place in cities crucial to the supply chain, meaning they had global ramifications. Now, following the end of the previous policy, COVID-19 cases have skyrocketed in the country, with its
population vulnerable due to a lack of natural immunity.
Chinese companies remain integral to a functioning global supply chain, so the progress made in the country will be a key factor in determining whether ‘normalcy’ is achievable this year.
Adapting to Inflationary Changes
2022 saw a period of record inflation, and for months experts have been predicting a recession. As the economy slows down, businesses and individuals will both be impacted. During a recession, disposable income is at a premium. This leads to shifts in buying patterns, and organizations must react.
Those with the technological capability of capturing and harnessing real-time data, and the flexibility to procure in line with the data, will find these changes easier to adapt to than those using older and more rigid supply chain management strategies.
Shifting Demand May Provide Relief
To counter shortages and delays, many organizations stocked up on supplies. As a result, they’re left with bloated warehouses and inventories. These organizations may be purchasing less this year, as they work through the abundance of stock they currently have. Similarly, with the recession hitting people’s wallets, general demand is expected to decline. These two factors will reduce strain on the supply chain, providing welcome relief and an opportunity for logistics companies to use newfound capacity to optimize their operations and recover.
Easing Pressure at the Ports
One positive trend leading into 2023 is an easing of record-breaking congestion at U.S. ports. At the end of 2021 and into 2022, historic backlogs were being registered. In January 2022, around 150 container ships were waiting to unload at U.S. ports, with more than 100 ships waiting for congestion to ease at the ports of Long Beach and Los Angeles. To counter the problems on the West Coast, volume shifted to U.S. ports on the East Coast and in the Gulf. Initially, the backlogs followed the trend, and while congestion eased to the west, it began to build in the east and in the Gulf.
Finally, though, relief is on the horizon. As of January 6, 2023, almost no ships were waiting in Pacific waters, and only around 30 were queuing off all North American ports combined. This represents huge progress. If congestion remains at a minimum, and imports flow more freely, the ports will pose one less problem to procurement this year.
Domestic Manufacturing and Nearshoring
One major takeaway from the last few years of supply chain chaos is that the U.S. is too reliant on China and other countries for the manufacturing and supply of many critical products. In recent months, organizations have made progress in shifting their focus to domestic manufacturers, and that trend will continue in 2023.
In an effort to regain control over supply, some organizations have turned to ‘nearshoring’, the practice of moving a business operation to a nearby country. The U.S. is well positioned between two valuable trade partners — Mexico and Canada — which provides organizations with a broad selection of more local manufacturers and suppliers that can help them lower procurement costs and reduce transit times.
2023: The Potential for Progress and Problems
With many of the challenges that have impacted the supply chain over recent years remaining, it seems unlikely that 2023 will see a return to normalcy. A survey of supply chain executives reflects this, with more than half saying that they didn’t expect a return to a normal supply chain until the first half of 2024 at the earliest.
There are, however, reasons to be optimistic. The progress made at the ports will facilitate the smoother transition of goods and imports, and a reduction in demand this year could serve to ease capacity problems throughout the supply chain.
As we’ve seen in recent years, though, the supply chain is volatile, and seismic events are impossible to predict. Just 12 months ago, Russia was yet to invade Ukraine, and no one could have foreseen the problems that accompanied the conflict.
No matter what happens in 2023, though, the CNECT team is on hand to help. We’ll continue to protect our members from unnecessary price increases, provide alternatives when products are unavailable, and ensure they are accessing exclusive discounts. If you’re not already a member, we’d love to discuss how a no-fee CNECT membership can help you build a more resilient supply chain, so get in touch with our team today.