While many in the Supply Chain world will posit that there was nothing to fix because the chain worked and was never broken, the fact is that the challenges that we saw over the past two years were a manifestation of Supply Chains built on the expectation that globalization with its interdependence and interconnectedness are here to stay. The pandemic, though unprecedented, exposed the vulnerabilities and weak foundation on which our consumption dependence was built. With more challenges, including regional and global conflicts and the devastating effects of climate change, structural changes need to be made inter and intra countries. While the US Infrastructure bill was passed, the difficult task of repairing the ports, airports, bridges, and roads has barely gotten off the ground.
Supply Chain stayed in the limelight amidst a tumultuous start to the year with the war in Ukraine, continuing covid lockdowns in China, and of course the relentless rise in inflation across most of the developed world. Accountability is a wonderful thing! It is always humbling to review one’s prognostications and opinions, learn lessons from it and attempt to do a better job moving forward. So, in that spirit, I re-visited my predictions for 2022 (Supply chain trends for 2022: We broke it, let us fix it!) to score my thoughts before I write my piece on what I foresee for 2023!
Noted below each of my predictions are reflections on the status and my thinking on its accuracy. Would be great to hear from you the reader on its veracity.
Prediction 1. The fever will break – not just Covid and its mutating variants, but Supply chain challenges.
November 2022 – On target!
Prediction 2. Pre seed venture funding will accelerate with a view to solving SC challenges of the past two years through technology. Along with some pure play incumbents, retailers who have acquired logistics firms will invest and acquire several of these startups. Perhaps:
November 2022 – On target!
Despite the contraction in venture funding, supply chain startups in the seed through growth phases attracted upwards of $7bn from investors who are bullish on its prospects. Automation – not just autonomous vehicles – within Supply Chain systems received a boost due to the pandemic challenges and will change the efficiency and look of future chains.
Prediction 3. Change in forecasting methodologies (see “Has the just in time system run its course”)
November 2022 – Mixed!
Prediction 4. As demographics and immigration regulations change the labor challenges will continue – whether it is drivers, warehouse, or gig workers for final mile delivery. Look out for:
November 2022 – Mixed!
Without a doubt labor was a challenge, with a plethora of choice the average employee, at least in the first few months of the year, saw their starting wages increase substantially. This increased the urgency among logistics and fulfillment firms to automate warehouse functions and invest in retaining their existing workforce.
Prediction 5. Penalties and incentives for reducing container hoarding
November 2022 – TBD
It is unknown on the status of this, however companies are investing in technology or partnering with new technology vendors such as Fourkites or Project 44 on visibility.
Prediction 6. Demand for 3PL/4PL will significantly increase – rebranding to Supply Chain as a service?
November 2022 – On Target
This is happening, as one heard on the latest earnings call UPS is actively promoting its Supply Chain as a service which integrates all its services end to end and provides an opportunity for turnkey solutions to new and growing customers across different sectors.
Prediction 7. China+n strategy to shorten the supply chain and for alternative production and manufacturing.
November 2022 – On Target
China’s zero covid policy accelerated the trend to alternative sources of production more than a concerted strategy to near shore the supply chain. Multinationals have started the process of developing production and manufacturing in multiple countries including China. While China will continue to have an outsize role in the immediate future, it is highly likely that it will remain one among many five years from now.
Prediction 8. While the conventional wisdom is for sustainability to take center stage, I suspect only minimal measures will be undertaken to keep shareholders at bay.
November 2022 – Mixed
Cop27 UN report highlighted greenwashing – about corporations misleading the public to believe they are doing more on sustainability then they are. While technology is a key enabler to integrate sustainability efforts into everyday processes, not many firms are likely to invest in them during these inflationary and recessionary times. That role will fall to startups and there are signs that investment in this area has increased.
Source: Transport Intelligence, January 5, 2023
Author: Raghu Ramachandran, Business Analyst and Founding Partner of 13 Colony Global