As we start the new year, disruptions to supply chain operations, including geopolitical conflicts, inflation, and labor shortages, are expected to continue. “In the year ahead, a second wave of unplanned supply chain risks will likely be realized,” notes KPMG, which reported that 71% of global companies highlight raw material costs as their number one supply chain threat for 2023.
In this environment, organizations may have limited access to manufacturing materials, replacement components, and maintenance items. Increased energy costs and price surges may also make manufacturing challenging and prompt global corporations to reevaluate their manufacturing operations and consider shifting them onshore, KPMG said.
KPMG’s survey of global organizations also showed that:
- More than 60% expect that geopolitical instability will have a detrimental impact on their supply chains in the next three years
- Nearly half expect cybersecurity to be an important operational challenge for their supply chains during the next three years
- 67% believe meeting customer expectations for speed of delivery will be a critical factor affecting the structure and flow of their supply chains over the next 12-18 months
- Some plan to invest in digital technology to bolster their supply chain processes, data synthesis, and analysis capabilities
- 54% plan to increase their focus on sustainable sourcing
Technology Trends to Watch
To address supply chain disruption, companies in recent years have invested in cloud-based digital transformation strategies to improve the sophistication of their supply chain planning, visibility, and risk management, and this key technology trend is expected to continue in 2023.
Another digital trend likely to have a significant impact this year is the Internet of Things (IOT), according to the Association for Supply Chain Management’s Top 10 Supply Chain Trends 2023 report.
The IOT — a network of connected devices that facilitates data collection and communications — provides real-time smart logistics information to supply chain managers about product location, movement, estimated time of arrival, and temperature conditions. With data-driven insights generated by IOT, companies can optimize their supply chain networks and control costs, gaining a competitive advantage.
Companies are also turning to mobile and stationary robotics to assist workers with warehousing and transportation and as a result, are transforming supply chains. “Safer, more efficient warehouses, with fewer people in them, will drive down costs,” ASCM reported. “Although the initial capital investment will be high, the cost savings are primed to be dramatic.”
Additionally, organizations should be reevaluating their transportation planning systems in the coming year to identify logistics vulnerabilities. This effort will ensure that supply chain stakeholders are collaborating in an integrated way and adapting plans based on real-time information. “Logistics organizations must create the conditions necessary for a seamless interaction among multiple transportation networks and their digital replicas. They also should be rethinking the physical connections among warehouses, highways, ports, waterways, and air transportation,” ASCM said.
Other digital transformation trends that became prominent during the COVID-19 pandemic (which we’ve covered in previous blog posts) and are set to continue in the coming year include data analytics and artificial intelligence (AI), data security, and sustainable supply chains.
Cyber Risk Mitigation Remains a Priority
As companies consider upgrades to their digital systems and invest in new technologies in 2023, they should be mindful of data security and managing cyber risk. Cyber criminals are becoming increasingly sophisticated when infiltrating supply chains.
“The supply chain can offer vulnerabilities that provide external parties with a pathway to get into your systems, particularly your supplier network,” explained KPMG. “Criminals could also hack in through basic warehouse equipment such as barcode readers or via internet of things (IOT) devices applied within your manufacturing and other operational sites.”
KPMG recommends that all companies consider the following cyber risk mitigation measures in 2023:
- Identify strategies that your company and its partners must enact to mitigate cyber risk in your supply chain
- Ensure that new third parties in your supply chain ecosystem undergo cyber risk assessments
- Consider AI and machine learning when onboarding new suppliers to address threats such as email spam and phishing
- Conduct a cyber assessment for all supply chain activities using IOT devices (e.g., storing data, managing inventory, tracking goods)
In the next installment of our 2023 Forecast, we’ll examine what trends are on the horizon for product lifecycle management and technologies—including End of Life (EOL) issues—that can help manufacturing companies foster innovation and drive competitive advantage.