Navigating a Supply Chain in the Context of a Global Recession
With inflation lurking on the horizon and placing heavy pressure on company margins,, a recession is looming for companies both large and small.. While it’s too early to predict specifically when and where a recession may hit , key economic indicators are pointing to the global economy shrinking in the year ahead. Consequently, global supply chain leaders have learned that an ounce of preparation can out weigh a pound of cures and so immediate action is necessary to best mitigate risks should the current trend continue.
Although the near-term economic situation is cloudy, there are effective steps that you can take to overcome economic volatility while being ready to take advantage of new possibilities as they arise.
What tops the list of supply chain challenges from a possible recession?
Recession or not, global supply chain disruptions will likely persist, and most companies continue to struggle against rising transportation costs, inflation, labor shortages, product scarcity, demand planning, political conflicts, , and extreme weather conditions.
Two primary supply chain challenges being faced are: Talent and Labor shortage.
50% of CFOs, per a recent Gartner report,,state that filling critical internal positions to keep factories running, despite chronic recruiting and employee retention issues, is their ‘stay awake at night’nightmare. 47% of these CFOs claimed that they are seeing significant workforce resignations and finding it harder and harder to find qualified professionals.
Compared to prior months, April (2002?) showed an increase staff losses, with fewer manufacturers claiming improvement in fulfilling head-count objectives. The challenge companies face when it comes to filling higher-level jobs that require experience and intellectual skills , is that a recession only complicates the recruitment and employment process. To retain talent, firms should review how their organization manages its HR, clarify the employee value proposition to recruit and retain top professionals with digital talent and aptitude..
How can Supply chain data centralization and automation mitigate the impact of employee turnover and provide the technology flexibility to change carriers and suppliers?
Demand Decline
Softening order demand, which can lead to surplus inventory, is one of the most serious and urgent supply chain threats when facing a possible economic downturn. During downturns, costs tend to rise dramatically compared to revenue while causing warehouse inventories to grow faster than sales, a deadly combination.
The hazards of declining demand can compound. Revenue declines can harm cash flow and workforce demand and exacerbate supply chain volatility. According to a recent Gartner report, 48% of CFOs believe supply chain unpredictability and satellite challenges will stretch beyond 2022.
Increasing price pressures can decrease profitability as well, market shift and new competitors do not stop during a recession. Surplus inventory must be discounted to maintain healthy inventory levels while maintaining supplier commitments . If a slump lasts long enough, it can lead to financial difficulties with partners that spread throughout the the supply chain.
Companies with flexible supply chains and the capacity to adjust quickly to unforeseen variations in demand will gain a competitive, global edge..
Rising inflation
While 69% of CFOs are sure non-labour costs will continue to climb , inflation not only raises the price but also disrupts long-established methods for business leaders to understand, plan, and forecast product demand, supply chain resources, inventory, and cash flow. Formerly dependable ways of budgeting operational costs just will not stand up in an inflationary setting.
Because of this, reducing costs is just the tip of the iceberg when balancing the impacts of inflation. Other resources, such as raw materials, energy, and property , will also need to be optimized, since enterprises using these critical resources will need to maximize margins during these difficult times.
Technology as the Solution for facing an economic downturn
Many supply chain leaders need assistance in choosing the best course of action in solving global supply chain disruptions. Investing in technology, automation, and data centralization is a safe bet and the most beneficial path for long-term supply chain stability, especially during a recession.
Data and technology optimization enable firms to identify methods to minimize costs, to increase on-time delivery to clients , reduce expenses via more efficient planning, and monitor critical performance metrics.
Positive response to digital investments, in part triggered by the Covid-19 pandemic, have 94% of CEOs interested in continuing, or increasing, the pace of digital change in global supply chains. in addition, 70% of CFOs predict additional spending on digital technology. Enhancing insight into supply chain operations and partners across the value chain is critical for building the resilience and agility needed by today’s supply chains in responding to modern-day risks.
Using a modern supply chain technology platform helps businesses to make supply chain planning and sourcing more cost-effective by leveraging real-time analytics and data to help increase efficiency and productivity throughout their supply chain.
Data centralization technology utilized to enhance supply chain planning helps businesses to be more sensitive to demand fluctuation and lessen the impact of recession caused extended lead times and delivery delays. Eventually, investing in predictive and automated digital solutions will help firms become quicker, leaner and more profitable.
2023 is a difficult time for supply chain leaders. As the country braces for an economic slowdown, the supply chain will surely suffer, with reduced demand, increasing costs for manufacturers, and lower overall profitability for most businesses.
Companies that take pre-emptive steps to make their supply chains more flexible and adaptive, such as investing in smarter, more data-driven technologies, will not only be able to survive the present crisis but will also emerge with a definable, long-term competitive edge.
Agistix’s extensive business expertise lets us offer a multifunctional, easy-to-use software solution to have your supply chain in the palm of your hand. Learn more about our supply chain platform solutions today.
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Author
Trevor Read
President at Agistix based in San Francisco. I am an entrepreneur with a passion for data, and technology. I am results-oriented and committed to developing fast-deployment solutions to help customers seize the new opportunity coming from big data in the global supply chain.
