There are numerous indications that supply chain is more critical than ever. Results from The Conference Board’s C-SUITE OUTLOOK survey showed supply chain disruptions, labor shortages, and rising inflation to be 3 of the 5 high impact external factors on the minds of CEOs. In addition, the Board asked executives what steps they were taking in response to the war in Ukraine. The most frequently chosen option for CEOs was “Focusing on making supply chains more resilient.”
Earlier this month in the post titled What Does 2023 Have In-Store for Global Supply Chains?, I informed our readers that ARC Advisory Group/Logistics Viewpoints is conducting a survey to determine the perceptions, priorities, and strategic initiatives of today’s supply chain and logistics executives. The survey is structured to determine the relative importance of competing objectives, how the importance has changed over time and why, and the degree to which certain external factors (resource shortages, cost inflation, etc.) are expected to exert a negative impact in 2023. Here are some preliminary survey results thus far.
Supply Chain Resilience
We questioned supply chain practitioners about the importance of supply chain resiliency in their organizations. We approached the topic from the perspective of importance in comparison to other objectives and change in importance over time. Our preliminary findings suggest that supply chain resilience has been increasing in importance over time, but still remains secondary to the end goal embedded in the perfect order metric – the right product, to the right place, at the right time. However, supply chain resilience is more than just a concept to practitioners. In fact, many respondents plan to engage in numerous tactics to support resilience in 2023. According to our preliminary results, the most widespread tactics to be utilized in 2023 include planning and forecasting process improvements and sourcing of materials from more proximate/local suppliers. Planning and forecasting process improvement is sensible and intuitive – it is an internal process where moderate change can deliver notable results. However, I am surprised at the degree that localized sourcing is being considered. This may be an indication of long-term supply chain risk mitigation efforts taken in response to the recent widespread supply chain disruptions.
Negative Impact from External Factors
The Conference Board survey results indicated labor shortages and inflation to be top concerns for CEOs. And it appears that the combination of labor and inflation in the form of warehouse labor cost inflation is currently the highest concern for 2023 among the listed warehousing related external factors in ARC’s survey. This result can be attributed to the increased prevalence of broad-based labor cost inflation over the last year and the exceptional degree to which labor costs are rising in fulfillment functions. Inventory shortages/stock-outs was the factor with the second highest negative impact potential for 2023 in our preliminary survey results. I suspect that inventory shortages would have been the highest ranked factor if we conducted our survey a year ago. However, material and supply shortages have eased since the most constrained days of the pandemic. And it appears that practitioners have some level of cautious optimism about their ability to supply customer demands in 2023. Finally, warehouse labor shortages remain a concern in 2023 as one would expect given the tight warehouse labor market in North America.
This is a small sample of preliminary results from ARC Advisory Group’s survey on Today’s Supply Chain: Resilience, Risk, and Responsiveness. More to come!