2023: Applying Supply Chain Wisdom & Expertise

This year, the Merriam-Webster dictionary declared “gaslighting” to be the word of the year for 2022. I think they should have chosen “supply chain.” It’s come out of relative obscurity in the business world to widespread use among politicians and consumers alike. My prediction for 2023 is that the supply chain—and associated topics such as logistics technology and manufacturing locations—will continue to be on everyone’s lips in the coming year, to the point that it may claim word of the year for 2023.

Supply chain tech

Resilience and transparency are the gold standards of supply chains that have been plagued with increasing risk and uncertainty and a host of challenges. Technologies that support those efforts are going to garner more interest. In the past, supply chain excellence was a goal, but for forward-thinking organizations, it will become a reality this coming year.

Market research firm Spherical Insights and Consulting valued the global supply chain management market at $16.64 billion in 2021 and predicts that it will grow to $58.89 billion by 2030.¹ The offerings in this area are plentiful, and competition will be fierce. For electronics OEMs, though, there will be a couple of technology areas of particular interest. For example, across the board, regardless of the supply chain issues they address, solutions will be delivered through the cloud so data can be accessed quickly from anywhere. Software-as-a-service (SaaS)  addresses the need to scale quickly. Further, ease of implementation and relative affordability make this delivery approach beneficial as organizations work to get supply chain partners to adopt new technology.

In terms of applied technology, artificial intelligence (AI) and automation will see a large uptick in adoption. Zion Market Research puts the global market figure for AI in the supply chain at $1,594.50 billion in 2021, adding that the total market will reach $12,798.62 billion by 2028, representing year-over-year growth of 41.50 percent over the forecast period.² The ability of automation and AI to remove the need for human input enhances efficiency, security, and reliability—directly addressing critical goals for the supply chain.

Shifts in manufacturing

This past year, with its natural disasters, the pandemic, and regional conflict, has everyone thinking about manufacturing and sourcing. Onshoring and nearshoring are back on the table. Despite the talk, the numbers show that with critical partners like China, not too much has changed between 2021 and 2022 (Figure 1).

Figure 1: Trade with China has remained fairly stable in 2022 compared to 2021, with US imports from China increasing slightly. (Image source: Bloomberg)

On the face of it, onshoring and nearshoring are always under consideration in order to secure supply chains and streamline manufacturing. Still, they are difficult to manage on a practical level: large manufacturing plants have their own ecosystems. It will be interesting to see how it evolves.

Improving logistics

In 2022, container ships were coming to grid-locked ports and sitting—and shipping prices have skyrocketed. On land, a dearth of truck drivers created other logistics headaches. According to the American Trucking Association, the industry must hire nearly 1.2 million new drivers to address attrition caused by retirement and drivers leaving to do other jobs over the next decade. Meanwhile, logistics providers report that ships are on order and will be delivered in the coming year.

Semiconductor manufacturing rebound?

It’s pretty much impossible to talk about a 2023 outlook without talking about semiconductors directly. Lead times, while improving, will remain extended. And for semiconductor manufacturers, revenues are predicted to drop 3.6 percent after solid and even strong growth during the pandemic (Table 1).

Table 1: The coming year is probably going to be tough for the semiconductor industry with market growth going into negative numbers due to global economic woes and weakening consumer demand. (Image source: Gartner)

However, it would not be overly optimistic to look forward to 2024 for a rebound in semiconductors. By then, new fabs will start coming online, and inventories will have had time to increase and close the gap between supply and demand.

Like the two years prior, 2022 was challenging from a supply chain point of view, but the worst may be behind us. In the coming months, we’ll be talking more about supply chain solutions than supply chain problems. Logistics and component manufacturing shifts will start to move the needle in favor of improved supply chain resilience. All told, expect 2023 to be the year we see things finally begin to settle down.

References:

1: https://www.globenewswire.com/news-release/2022/11/30/2565343/0/en/Global-Supply-Chain-Management-Market-Size-To-Reach-USD-58-89-Billion-By-2030-CAGR-of-10-8.html

2: https://www.prnewswire.com/news-releases/at-41-50-cagr-artificial-intelligence-in-supply-chain-market-size-is-expected-to-reach-usd-12798-62-billion-by-2028-says-zion-market-research--global-ai-in-supply-chain-industry-trends-share-analysis--forecast-report-301557283.html