The Ferrari Consulting and Research Group through its affiliate the Supply Chain Matters blog shares select individual prediction snapshots that are included in our Annual 2023 Predictions for Industry and Global Supply Chains Research Advisory publishing later this month.
To begin this series will share a excerpts from our first prediction that sets the overall context and perspectives for the coming year.
Since our inception in 2008, The Ferrari Consulting and Research Group has annually published a series of supply chain management focused predictions. They are produced to advise our clients, sponsors and the broad global supply chain management community as to what to anticipate in the coming year.
Our goal is to depict how likely global, regional, economic, industry and advanced technology trends will impact, and likely influence required supply chain management actions. They further provide the baseline of our added research and advisory topics during the coming year, along with continuous Supply Chain Matters blog updates.
The context of these predictions include a broad cross-functional umbrella of what is today considered supply chain management, and includes areas of leadership and strategy, product management, strategic sourcing and procurement, supply chain planning and customer fulfillment, manufacturing, logistics, transportation and customer service management.
Our research advisory report for 2023 begins with a review of the themes of our prior three years of predictions and the derived learning for the supply chain management community. That includes an overview of our themes for 2023 which were shared in a previous two-part series published on Supply Chain Matters. We further include our ten specific predictions for the coming year addressing areas of business, process, people, technology and other key areas.
Our complete detailed research advisory report will be made available on a complimentary basis in the Research Center menu that will appear on the top panel of our two web sites on January 20.
Let’s begin with the sharing of excerpts from our first prediction.
2023 Prediction One: Supply Chain Management Teams Should Anticipate Continued Economic Uncertainty of Global Markets and Geo-Political Driven Events, with Some Easing of Prior Year Disruptions. A Significant Challenge for Supply Chain Management Leaders and Respective Teams is to Avoid Complacency.
As multi-industry supply chain management teams enter 2023, they will be presented with expected global economic themes, financial outlooks and overriding business sentiment that are likely to influence decision-making. As our graphic depicts, there are numerous clouds on the horizon with storm threats, but some view the storm might pass.
There remains a series of ongoing global supply chain challenges to consider, along with needed supply chain business process and technology enablement considerations.
Included in our prediction background data review are the following snippets:
Global Economic Themes and Financial Outlooks
- Expected 2023 global economic growth in a range from 2 percent to 2.7 percent, with a one if four probability that global growth could fall below 2 percent.
- Global trade slowing to one percent from an estimated 3.5 percent in 2022 and 9.7 percent on 2021.
- The three largest global economies (Europe, United States, China) expected to stall.
- Downside risks that include monetary policy miscalculations, an uncertain outcome to the ongoing Russia-Ukraine conflict and further supply network disruptions as a result of more far-reaching spread of Covid variant infection rates across China.
- The value of the US Dollar consistently increasing during 2022 against other global currencies, providing added headwinds to counties and businesses globally in the form of added inflationary cost pressures.
- CFO top three concerns focused on inflationary cost implications, labor quality and availability, ongoing supply chain strategies.
- CEO surveys consistently indicating that companies were severely disrupted in the past twelve months and that their companies have entirely shifted approaches to supply chain management.
Global Supply Chain Challenges and Concerns
- The shifting from primarily product demand and supply constrained supply chains that occurred in 2021 and early 2022, to predominately demand constrained conditions, placing a top priority on preserving revenues and cash among businesses in this coming period.
- Global manufacturing activity as depicted by the J.P. Morgan Manufacturing PMI® which began 2022 at an expansionary conditions value of 54.2, falling 5.6 percentage points by the end of December to contractionary value of 48.6, a 30-month low.
- China’s sudden lifting of Zero tolerance Covid lockdown policies in late 2022, with not enough preparation for implications and for significantly higher levels of unchecked virus spread.
Various multi-industry supply chain management teams should anticipate continued global-wide economic uncertainty, the threat of economic or manufacturing driven recession and of added geopolitical driven events to be on the minds of senior business executives.
In the midst of ongoing concerns for either regional or global-wide recession, high inflation and increased cost of living expenses, consumers and businesses become more conservative in buying and investment tendencies. Maintaining or reinforcing customer and brand loyalty becomes especially paramount.
As noted in our prediction background, economic, business and global supply chain sentiment reinforce the need for constant analysis, scenario-focused decision-making, and continued readiness for supply chain pivots to unexpected or rapidly changing developments. A key learning for retailers, manufacturers and wholesalers in 2022 was how were they able to sense and respond to the widespread changes in consumer buying of products in favor of experiences.
Overall inventory levels among retailers and online channels remains at high levels and continuing to fill warehouses. The past two years have further provided stark realization that just-in-time planning, and inventory management has exposed many vulnerabilities when applied to continuous and compounding global-wide disruption events.
Thus remains the ongoing need for augmenting supply networks with added resiliency and agility. This is to better anticipate areas of potential disruption and buffer the impacts to the business operationally and financially. Building evidence suggests that efforts are underway in addressing such needs, but teams will need to stay the course. We include in our research advisory specific a detailed prediction for this area.
One of the clear takeaways from the events of the past three years is almost universal awareness that supply chains do matter, and that business leaders have elevated their attention to the readiness of supply chain capabilities in supporting needed business outcomes. This will be an enabler for supply chain leaders in securing continued management sponsorship for ongoing investment in process, people and technology enablement areas in 2023. That stated, budget realities will demand a solid cross-functionally aligned plan, managed scope, with clear well understood deliverables and expected time-to-value.
Avoiding Complacency and Hubris
Some in the supply chain ecosystem believe that for multi-industry supply chains the worst is over and a return to some normalcy and predictability is expected in the coming year. To some extent, entering the year, signs do point to an easing of prior disruptions and supply chain driven cost inflation. While it is comforting for supply chain leaders, various services providers or media to want to anticipate that some sense of a new normal has arrived, we urge caution to such a viewpoint.
There remains a lot of downside uncertainty concerns, especially focused on China, the fate of the ongoing Russia-Ukraine conflict, the European continent’s challenges with energy needs, and with concerns for increased global warming and heightened geopolitical events. We have included a specific prediction related to the latter.
Opportunity and Renewed Focus
A clear opportunity to be addressed remains the shifting of prior focus just-in-time driven, end-to-end efficiency flow of materials, inventory and resources, which exposed vulnerabilities with cascading and vulnerable disruption. Instead, the opportunity remains the transformation to an outside-in driven flow of information, materials, resources and forward looking decision making capabilities that support added resiliency and agility in supply networks.
This should be a learning that multi-tier supply chain visibility coupled with the concurrency of planning and customer fulfillment decision-making processes require added attention and likely different perspective. The overall context remains that of needed resiliency and agility and there is ample evidence that change is occurring. The challenge is overcoming internal and business wide complacency.
Talent and Skills Retention Take Center Stage
Talent skills retention, reskilling and development along with select process automation again take center stage in 2023 for both business, technology and supply chain operations control and management areas.
With the overall management focus turning to an economic recessionary stance of likely added cost control and cash preservation actions, CFO’s and Chief Supply Chain Officers will likely have difficult decisions and tradeoffs to make during 2023. That stated, our belief is that skills and talent required for ongoing supply chain transformation and realignment needs are likely to be preserved.
We further believe that the coming year will present added challenges in worker demands for added compensation and work-life benefits after over three years of continuous needs for extraordinary worker performance. Here again, we have a detailed prediction further in the report addressing this specific area.
Supply Chain Business Process and Technology Enablement
With upwards of $30 billion of private equity and shareholder investment channeled into the digital transformation of various areas of supply chain business process and decision-making needs, the notions of industry disruption of processes and established players grows, particularly in transportation and logistics segments.
The supply chain technology market itself will continue to be rather dynamic in the coming year including added merger, acquisition or privatization deals among existing players leveraging either for increased market share, cash burn preservation, market consolidation or strategic needs. We further anticipate a shakeout of software technology and certain technology integration players by the second half of 2023.
Our research advisory shares more detailed perspectives in a separate prediction.
Thus is the overall backdrop for supply chain teams entering 2023, a need for adaption, realignment, continued response and added supply chain pivots amid a kaleidoscope of economic, business, geopolitical and supply chain business process and decision making challenges.
This concludes our Supply Chain Matters Part One posting.
We welcome additional client and reader feedback to this series including your own predictions for these areas. Our contact information is noted on both our web sites.
Next week we plan on featuring several other of our detailed predictions so keep your browsers pointed to Supply Chain Matters.
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