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What Will the Supply Chain Look Like in 2023?

What Will the Supply Chain Look Like in 2023?

Dec. 15, 2022
KPMG offers its take on the challenges of 2023 and what companies can do to mitigate them.

Next year won't be any less complex in terms of supply chain challenges. KPMG's Global Operations Center of Excellent summarizes the challenges this way.  (Note: in the report under each suggestion there are specific recommendations to address the issues.)

Nations will be skeptical about cross-border trade cooperation

As governments explore domestic self-sufficiency in both material supply and manufacturing, they are looking to build ‘friend shoring’ relationships – trade links with like-minded and most likely geographically close countries (‘nearshoring’) where the supply of goods will likely be more secure.

More than 6 out of 10 global organizations expect that geopolitical instability may have a detrimental impact on their supply chains in the next 3 years.

Cybercriminals will ramp up activity

Supply chains are vulnerable, especially through their supplier networks. Hackers can also enter through basic warehouse equipment such as a barcode reader or via the Internet of Things (IoT) devices applied within your manufacturing and other operational sites. 

Key material access turmoil

Organizations may experience limited access to critical inputs for manufacturing, or even spare parts and critical maintenance items. In an aligned challenge, key commodity prices and availability may fluctuate – whether that be fuel/diesel, construction items like timber, steel and resin, or plastic for packaging. 71% of global companies highlight raw material costs as their number one supply chain threat for 2023.

Manufacturing footprints will change shape

One trend for next year will be the continued impact of online retail on manufacturing, which will lead manufacturing companies to provide more customization.  This will change the footprint as organizations establish new supply chains or simply divert production to other markets with existing capacity.

The report found that more than 7 out of 10 companies that announced a shift of their manufacturing locations between 2018-2023 moved operations into Asia.

Retail and distributing supply chains are morphing rapidly

The prevalence of last-mile delivery challenges, coupled with reliance on suppliers that are often experiencing difficulties also, means global and local retailers may need to review their inventory distribution network and create a seamless experience around a unified commerce approach.

Supply chain technologies will acceleration

In 2023 investment in cloud-based digital transformation strategies will continue. It will be focused on the back office, better customer engagement, supply chain and operational capabilities . Additional investments will be to uplift supply chain planning maturity, automation of warehouse and operational tasks, as well as in gathering better end-to-end supply chain analytics to create enhanced visibility.

The report showed that 6 in 10 plan to invest in digital technology to bolster their supply chain processes, data synthesis, and analysis capabilities.

Scope 3 emissions will be scrutinized 

Companies will be expected to make informed decisions to reduce these emissions, and ‘greenwashing’ will not pass scrutiny. Adding to the pressure will likely be a shift in investor activity towards organizations that can prove their scope 3 emissions are low. Global banking institutions, private equity and venture capitalists want to see that their portfolio is aligned with sustainable organizations. 

The report found that  53% of organizations plan to increase their focus on sustainable sourcing.

KPMG points to three abilities that companies should have to meet these challenges:

Capability: A mature supply chain planning capability to always be a step ahead and ready to tackle supply chain risks and opportunities

Agility: Making sure your supply chain is responsive and agile to manage the unexpected, and to deal with these threats and disruptions appropriately, efficiently and profitably

End-to-end forward-looking visibility: Having ‘control tower’ visibility on key real-time indicators; being able to maneuver your supply chain beyond your own business borders; and building real-time collaboration with your ecosystem of supply chain partners will likely be critical – all done using digital capabilities. The ultimate goal is to enhance collaboration across the supply chain eco-system.