Why the future of digital supply chains is unfolding fast

Global supply chain challenges

There have been several major challenges that tested the global supply chain over the last year. Let’s look at how inflation and the looming recession has changed the industry.

1. Inflation affects supplies, services

Inflation has driven the cost of everything sky-high. From supplies to services, everything is more expensive. About 71% of global companies stated the cost of raw material as their number one supply chain threat going into 2023. Not only does this affect service providers’ bottom lines, but it also drives prices up for consumers. In 2022, consumer prices experienced the largest 12-month increase in the last 40 years, increasing 9.1% over the last year alone.

Inflation is directly linked to two other major supply chain disruptions. Global tensions over goods have erupted all around the world this year. The Russian invasion of Ukraine caused roughly 7 million people to flee Ukraine, creating a massive humanitarian crisis. Several global superpowers placed sanctions on Russia for this move, which drove up the cost of essential goods such as food, oil, and gas.

2. COVID-19

Another massive world-changing event that shook supply chains around the globe is the COVID pandemic. The pandemic also contributed to inflation, but it had some unforeseen effects that we’re still grappling with today such as the labor shortage, factory closures and border restrictions.

The pandemic also permanently changed consumer behavior. People shifted to ecommerce to fulfill their essential needs. About 68% of consumers said they will continue to buy essential products online, creating a new challenge for traditional, physical stores, as well as greater pressure on the supply chain to deliver those goods.

Most notably for the supply chain, the queues at ports have been a massive challenge that we have yet to solve. Lines of hundreds of cargo ships long formed off the coast of some of the biggest ports in the world. It took months to process this backlog and wait times at ports remain high. Over the course of this year, ships have been stalled for an average of seven days, which is up 20% from the start of the pandemic.

These problems are, of course, interconnected. The pandemic caused the labor shortage, which then caused the backup at ports, and eventually caused prices to increase to make up for lost time. Let’s take a look at some of the ways companies have been trying to tackle these massive challenges they faced over the last year.