Supply chain professionals more positive despite economic outlook

15 February 2023 Consultancy.com.au 4 min. read
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A bleak economic outlook hasn’t entirely dampened the spirits of supply chain professionals, a new study has found, with intended increases in investments and some expectations of reduced uncertainty.

According to a new report from Prological Consulting, professionals in the supply chain, logistics, manufacturing and other related sectors are evenly split on their expectations for any short-term improvements to the current state of supply chain uncertainty, despite largely agreeing on continued economic woes.

The firm’s survey also found that the biggest challenges facing business supply chains were issues closer to home.

Expectations for supply chain uncertainty in Australia and New Zealand

Initially rocked by Covid-19, global supply chains have continued to face unprecedented inventory shortages over the past year, further hampered by geopolitical conflicts and extreme weather events around the globe, including in Australia and New Zealand. In the words of Prological, chaos at ports, warehouses and retailers has become the norm for supply chain professionals. Of course, these large-scale disruptive events are almost impossible to predict.

With that in mind, and back-grounded by rising inflation and a bleak economic outlook, it’s perhaps surprising that the Prological survey picked up any positive sentiment at all. Yet, conducted among more than 250 industry professionals across Australia and New Zealand, almost a third of respondents believed supply chain uncertainty would get better or much better over the coming year – a figure contrasted against the 27 percent who predicted it would worsen.

Together with the remaining 45 percent of respondents who felt supply chain uncertainty would persist much as the same, the positivity expressed by a sizable contingent appears to fly in the face of economic expectations, with four out of five professionals surveyed foreseeing no improvement to the national economic climate – including 46 percent who in fact believed it would darken. The survey however perhaps reveals a surprising explanation.

Greatest challenges facing Australian and New Zealand supply chains

When quizzed on the greatest challenges facing their organisation’s supply chain over the next twelve months, it wasn’t geopolitical issues that came out on top (e.g. the ongoing war in Ukraine and renewed US-China tensions), but staffing shortages as the clear standout followed by rising consumer demand.

In a roundabout sense then, an economic slowdown and attendant rise in unemployment and drop in consumer spending should provide some relief to these concerns.

Further to the point, the recent widespread supply chain uncertainty is being tackled in part through increased investments, despite the economic challenges. As a common area of focus, 78 percent of businesses stated they were intending to boost their supply chain and logistics capabilities through strategic employment during the year. This figure was almost exactly matched by those planning on increasing their level of investment in supply chain and freight operations.

Has your business considered reshoring manufacturing as a result of pressures from COVID-19 and geopolitical turbulance?

Also notable in the context of the recent, large-scale international disruptions and heightened supply chain uncertainty: the majority of those surveyed, who primarily serve in leadership positions at large, global organisations (Prological for example counts Electrolux, Wesfarmers and Jaguar Land Rover among its roster of clients), said that their companies hadn’t considered reshoring manufacturing in response to pressures from Covid-19 and geopolitical turbulence.

“It is clear businesses have seen the importance of a strong supply chain, a learning for many that came through recent supply failures,” concluded Prological managing director Peter Jones, who established the consultancy in 2010 and has spent 25+ years in the business. “In response, as evidenced by this survey’s results, we are seeing rapid upgrades in supply chain capability and investment in preparation for 2023 and next up-cycles of competitive advantage.”