As featured on BusinessMirror: The supply chain trends shaking up 2023
Disruptions to supply chain operations are set to stay in 2023, whether they are existing or new geopolitical conflicts, inflationary pressures and the recessionary environment, climate change weather events, or other issues yet to emerge. They can all impact access to goods and how they flow to their final destination, create port holdups, reduce container and ocean freight availability, and surge prices, among other concerns.
In 2023, amid these disruptions, there will likely be some key supply chain trends to manage. Managing your organization's response to these can be a critical opportunity in the year ahead. At KPMG, from within our Global Operations Centre of Excellence, we firmly believe that: nations will be skeptical about cross-border trade cooperation; cybercriminals will ramp up activity; there will be key material access turmoil; manufacturing footprints will change shape; retail and distribution supply chains are morphing rapidly; supply chain technology investments will accelerate; and on the ESG front, scope 3 emissions will be scrutinized – notably, by investors and regulators in addition to the environmentally conscious consumer.
The retail industry in the Philippines also had its fair share of challenges from the disruptions in supply chain operations. The trade tensions between major global economies resulted in trade barriers, import restrictions and regulatory measures, increasing the expenses associated with importing goods and materials for the retail sector in the country.
Furthermore, extreme weather events like typhoons, floods and droughts can cause disruptions in supply chains. These events damage infrastructure, disrupt transportation systems and cause delays in product deliveries, resulting in higher costs for retailers and reduced product availability for consumers.
Retailers must remain vigilant to these challenges and implement strategies to mitigate risks and ensure business continuity. This may involve diversifying supply chains, developing contingency plans for weather-related disruptions and implementing pricing strategies that balance cost pressures with consumer demand.
Jerome Andrew H. Garcia
Advisory Principal and Head of Retail
KPMG in the Philippines
To help set yourself up for success in dealing with these supply chain trends in 2023, there are three overarching things you should have in place. These are:
A mature supply chain planning capability to always be a step ahead and ready to tackle supply chain risks and opportunities
Make 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 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 ecosystem.
With these three factors in place, you should be set up to turn the challenges of 2023 into a competitive advantage.
Here are the supply chain trends to watch for and what to do about them:
Nations skeptical about cooperation
Geopolitical tensions have seen nations turn inward and become skeptical about cooperation and interdependence. When it comes to the supply chain, this caution is fair, as if tensions escalate, essential materials may be inaccessible, or major trade routes could be shut down. Therefore, governments and industry leaders are exploring domestic self-sufficiency in material supply and manufacturing. Short of this, 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.
Cybercriminals ramping up
In 2023, cybercriminals will likely be even more sophisticated when it comes to infiltrating supply chains to damage or steal from businesses. The supply chain can offer vulnerabilities that provide external parties with a pathway to get into your systems, particularly via your supplier network. Criminals could also hack in through basic warehouse equipment such as a barcode reader or via Internet of Things (IoT) devices applied within your manufacturing and other operational sites. Cyber risk will likely be compounded if you rethink your supplier networks and make changes to friendshore/nearshore or invest in new technologies.
Material access in turmoil
In the year ahead, a second wave of unplanned supply chain risks will likely be realized. 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. Building resilient supply chains to combat future disruptions and adapt to new changes quickly will be key to help navigate these risks.
Manufacturing footprint changing shape
While accessing critical materials in 2023 may be challenging, so too will be manufacturing for many of the same reasons including the rapid rise in energy costs and price surge of key inputs. Therefore, global corporations with manufacturing operations will be re-evaluating their manufacturing footprint. Friendshoring and nearshoring will again be considered, however, there may be deeper thinking around whether manufacturing needs to be – and can be – done entirely onshore. This shift can’t happen overnight, but wheels will be put in motion.
Retail and distribution supply chains are morphing
While getting goods into the hands of consumers in 2023 might appear easier than in earlier COVID-19 times, it will likely not be simple or inexpensive. There may be more consumption mechanisms and channels than ever, and costs are not showing any signs of letting up, partially due to the close link to the complex manufacturing challenge, but also to the difficulty in getting goods into the hands of a more-demanding-than-ever consumer. 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.
Technology investment accelerating
Over the past year, investing in a cloud-based digital transformation strategy was a key trend, and in 2023 this trend is likely to accelerate as organizations seize technology as a strategy to mitigate their growing concerns around inflationary pressures and economic stagnation. While technology transformation often focused on the back office and better customer engagement, supply chain and operational capabilities will be front and center in 2023. Importantly, there will likely be a greater investment to uplift supply chain planning maturity, and automation of warehouse and operational tasks, as well as in gathering better end-to-end supply chain analytics to create enhanced visibility.
Supporting this trend is a move from some major technology suppliers towards holistic supply chain platforms. Rather than offering supply chain capabilities as discrete add-on systems, they are bringing them all together in one platform, aiming to provide a seamless user experience.
Scope 3 emissions scrutinized
Supply chain sustainability strategies have long been integral to achieving corporate ESG initiatives. In 2023, regulators and other important stakeholders (such as customers and the finance community) will likely demand a focus on scope 3 emissions control. You may 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.
Disruption to supply chains is a permanent fixture, and at KPMG we believe these supply chain trends will be integral to getting control of what's ahead in 2023. As we have seen, having sophisticated planning capabilities and agility, enabled by improved end-to-end visibility of your supply chain, will be both key to mitigating risks and areas of vulnerability, and harnessing opportunities otherwise difficult to convert to benefits. By proactively getting ahead of these trends, you can have the capability to set yourself up for success.
The excerpt was taken from the KPMG Thought Leadership publication: https://kpmg.com/xx/en/home/insights/2022/12/the-supply-chain-trends-shaking-up-2023.html
© 2023 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.