The supply chain is the cornerstone of logistics, so it is also where external factors such as changes in consumer behavior, transport or energy price rises, and even legislative changes in environmental matters, to give just a few examples, have the greatest impact. It is also where internal errors or inefficiencies are most noticeable.
As a result, the supply chain has undergone profound changes in recent times, and has become much more complex, mainly due to the rise of e-commerce and globalization. Companies now have to manage a huge number of references, often from different international suppliers, and with much shorter delivery times, as consumers have become accustomed to receiving their orders in a few days, rather than weeks or months.
It should be noted that supply chain and logistics are different: supply chain refers to the entire process, while logistics only deals with the storage, transportation and distribution phases, either at initial delivery or at return, known as reverse logistics.
What does the supply chain consist of?
As its name indicates, it consists of the chain that is established between different companies or operators to supply an order to a final customer. It includes from the initial request until it has been delivered to the customer and charged, and even possible returns and refunds. Therefore, one of the keys to the proper functioning of the supply chain is the coordination of all parties involved, such as manufacturing, distribution, warehousing, point of sale (online or physical) and transportation. At this point, today it is essential to have a WMS or logistics management software that integrates with the systems of the other parties involved so that the flow of information accurately reflects the stage of the order.
The supply chain is also referred to as the value chain, since products increase in value as they move through the links in the chain.
There are different types of supply chains, although some, such as the traditional chain, where each member worked autonomously, have fallen into disuse for obvious reasons. With the increasing complexity of today’s supply chain, a traditional chain would be unviable if not on a small, local scale.
The most common nowadays is to have an integrated supply chain, in which all parties involved coordinate and share information to carry out the supply process as efficiently and error-free as possible.
Supply chain trends for 2023
The supply chain is an ecosystem that has become very complex, and at the same time has been affected in recent times by external factors that have put it under a lot of pressure, both in terms of costs and its ability to meet demand efficiently.
On the positive side, according to indicators from the Federal Reserve Bank of New York, the trend of supply chain decompression continues. Increased lead times in the South Korean and Chinese markets and delays in Europe and Asia continue to be stress factors globally, but it appears that by 2023 the supply chain will tend to normalize.
However, there are still certain factors that may alter this optimistic scenario. First, the economic outlook for 2023 is still unclear. Many countries have not yet recovered from the pandemic, while other political and social factors have come into play that may aggravate the current economic slowdown. The tightening of some import and export regulations and increased competition are other points to be taken into account.
But companies want to be prepared. According to a recent Capgemini study, due to recent supply chain experiences, companies’ priority will be to invest in technologies and diversification. This is because 89% of companies consider supply chain disruption to be the main risk to growth, ahead of rising commodity prices and the energy crisis that is particularly affecting Europe, and will continue through 2023.
These investments will mainly focus on:
- Onshoring or near-shoring, having production plants closer, regionalizing supplier bases and reducing dependence on a single geographical area.
- Investment in technology that helps to reduce costs and make faster decisions: cloud, big data, business intelligence…; as well as in cybersecurity.
- Investment in remote and/or hybrid work, especially as a talent retention measure.
Investments in sustainability will also increase, but partly because they have been stopped or significantly reduced in 2022, and because environmental regulations have been tightened, especially in Europe. However, it is not at the same level of priority as the investments mentioned above.
In any case, 2023 will be a key year for the supply chain, as there is much uncertainty and expectation regarding the evolution of the economic, political and social context, which will surely influence whether these investments are consolidated or priorities are revised.Supply chain status and trends 2023